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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant To Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

Filed by the Registrant    

Filed by a Party other than the Registrant    

Check the appropriate box:

 

   Preliminary Proxy Statement      Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

   Definitive Proxy Statement     

   Definitive Additional Materials     

   Soliciting Material Pursuant to Section 240.14a-12     

STATE STREET CORPORATION

 

(Name of Registrant as Specified in its Charter)

 

 

(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)

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  (3)

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Fee paid previously with preliminary materials.

 

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

 

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LOGO    

 

Ronald P. O’Hanley

Chairman, President and Chief Executive Officer

April 8, 2020

 

Dear Shareholder:

We cordially invite you to the 2020 annual meeting of shareholders of State Street Corporation. The meeting will be held on May 20, 2020, at 9:00 a.m. Eastern Time. Due to the current Coronavirus (COVID-19) public health crisis, the annual meeting of shareholders will be conducted online via live audio webcast at www.virtualshareholdermeeting.com/STT2020. Holding the annual meeting of shareholders in person could pose a risk to the health and safety of our shareholders, employees and directors, and as a result, we have decided to hold the annual meeting virtually. You will be able to participate, submit questions and vote your shares electronically. The proxy statement and annual meeting provide an important opportunity for us to communicate with you as shareholders, and for you to communicate with us, on important topics such as our performance, corporate governance, the effectiveness of the Board of Directors and executive compensation. Details regarding virtual admission to the meeting and the business to be conducted are more fully described in the accompanying notice of annual meeting and proxy statement. Whether or not you plan to attend the meeting online, please carefully review the enclosed proxy statement together with the annual report that accompanies it and then cast your vote. We urge you to vote regardless of the number of shares you hold. To be sure that your vote will be received in time, please cast your vote by your choice of available means at your earliest convenience. Your vote is very important to us.

We look forward to the annual meeting. Your continued interest in State Street is very much appreciated.

 

 

Sincerely,

LOGO

Ronald P. O’Hanley

 

State Street Corporation

One Lincoln Street

Boston, MA 02111-2900


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LOGO     April 8, 2020

NOTICE OF STATE STREET CORPORATION 2020 ANNUAL MEETING OF SHAREHOLDERS

 

Date

     May 20, 2020

Time

     9:00 a.m., Eastern Time

Location

    
Virtual annual meeting of shareholders conducted via live audio webcast at:
www.virtualshareholdermeeting.com/STT2020

Purpose

     1.     To elect 11 directors
     2.     To approve an advisory proposal on executive compensation
     3.     To ratify the selection of Ernst & Young LLP as State Street’s independent registered public accounting firm for the year ending December 31, 2020
     4.     To act upon such other business as may properly come before the meeting and any adjournments thereof

Record Date

    
The directors have fixed the close of business on March 11, 2020, as the record date for
determining shareholders entitled to notice of and to vote at the meeting.

Meeting Admission

    





If you wish to attend the annual meeting online, please enter the 16-digit control number
included in your notice of Internet availability of the proxy materials or your proxy card, or by
following the voting instructions that accompanied your proxy materials. A list of our
registered holders as of the close of business on the record date will be made available to
shareholders during the meeting at www.virtualshareholdermeeting.com/STT2020. To access
such list of registered holders beginning April 10, 2020 and until the meeting, shareholders
should email State Street Investor Relations at IR@statestreet.com.

Voting by Proxy

    








Please submit a proxy card or, for shares held in “street name” through a broker, bank or
nominee, a voting instruction form, as soon as possible, so your shares can be voted at the
meeting. You may submit your proxy card or voting instruction form by mail. If you are a
registered shareholder, you may also vote electronically by telephone or over the Internet by
following the instructions included with your proxy card or notice of Internet availability of proxy
materials. If your shares are held in “street name,” you will receive instructions for the voting of
your shares from your broker, bank or other nominee, which may permit telephone or Internet
voting. Follow the instructions on the voting instruction form or notice of Internet availability of
proxy materials that you receive from your broker, bank or other nominee to ensure that your
shares are properly voted at the annual meeting.

 

By Order of the Board of Directors,

Jeffrey N. Carp

Secretary


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STATE STREET CORPORATION

One Lincoln Street, Boston, Massachusetts 02111

Proxy Statement

Summary Information

 

2020 Annual Meeting of Shareholders
Date:    May 20, 2020
Time:    9:00 a.m., Eastern Time
Location:    Virtual annual meeting of shareholders conducted via live audio webcast at: www.virtualshareholdermeeting.com/STT2020
Record date:    March 11, 2020

The proxy statement and annual report, and the means to vote electronically prior to the annual meeting, are available at www.proxyvote.com. To view this material, you must have available the 16-digit control number located on the notice mailed beginning on April 8, 2020, on the proxy card or, if shares are held in the name of a broker, bank or other nominee, on the voting instruction form.

More information about the annual meeting is described under the heading “General Information About the Annual Meeting.”

Voting Matters and Recommendations

 

Item    Board Recommendation

Election of Directors (see “Item 1—Election of Directors”)

   FOR Each Director

Advisory Proposal on 2019 Executive Compensation

(see “Item 2—Approval of Advisory Proposal on Executive Compensation”)

   FOR
Ratification of Ernst & Young LLP as Independent Registered Public Accounting Firm for 2020 (see “Item 3—Ratification of the Selection of the Independent Registered Public Accounting Firm”)    FOR

The following summary provides general information about State Street Corporation, referred to as State Street or the Company, and highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information you should consider when deciding how to vote your shares. For further and more detailed information on the matters referenced below, prior to casting your vote, please carefully review the entire proxy statement and our 2019 annual report on Form 10-K. Our 2019 annual report on Form 10-K accompanies this proxy statement and was previously filed with the Securities and Exchange Commission, or SEC.

 

  

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About State Street

State Street Corporation is a financial holding company organized in 1969 under the laws of the Commonwealth of Massachusetts. State Street provides financial and managerial support to our legal and operating subsidiaries. Through our subsidiaries, including our principal banking subsidiary, State Street Bank and Trust Company, we provide a broad range of financial products and services to institutional investors worldwide. We refer to State Street Bank and Trust Company as State Street Bank or the Bank.

As of December 31, 2019, we had consolidated total assets of $245.61 billion, consolidated total deposits of $181.87 billion, consolidated total shareholders’ equity of $24.43 billion and over 39,000 employees. We operate in more than 100 geographic markets worldwide, including the U.S., Canada, Europe, the Middle East and Asia.

We are a leader in providing financial services and products to meet the needs of institutional investors worldwide, with $34.36 trillion of assets under custody and/or administration and $3.12 trillion of assets under management as of December 31, 2019. Our clients include mutual funds, collective investment funds and other investment pools, corporate and public retirement plans, insurance companies, foundations, endowments and investment managers.

2019 began with significant industry challenges, including financial market weakness, falling interest rates and increased client fee pricing pressure, and our GAAP-basis revenue, pre-tax margin, diluted earnings per share (EPS) and return on average common equity (ROE) all decreased in 2019 from 2018. In the face of these headwinds, we acted aggressively to stabilize revenues and reduce expenses and made progress on key business objectives. Actions included:

 

 

strengthening our value proposition to clients, including the ongoing build-out of our front-to-back State Street AlphaSM platform

 

 

successfully executing a firm-wide expense savings program that exceeded initial targets and resulted in approximately $415 million in gross expense savings during 2019

 

 

reorganized the leadership of our multi-regional international business under a single executive to further our growth objectives

Due to these actions and the steady recovery of U.S. average market levels in 2019, our financial results in the second half of the year improved relative to the first half of the year. On a GAAP basis, second half total revenue increased by approximately 3%, total fee revenue was up approximately 2% and EPS increased approximately 7% relative to the first half of the year. With regard to risk management performance, we made progress on initiatives to improve our financial risk posture, but did not achieve desired non-financial risk improvement. While we know more is required for us to advance our overall performance, we are nonetheless confident in the trajectory of our business and focused on continuing to improve our performance. The performance metrics used in our executive compensation programs are linked to the below financial results presented on a non-GAAP basis.

Financial Performance

Consolidated Financial Performance, excluding notable items, non-GAAP(1)

 

($ In millions, except per share data)

    

2019

      

2018

      

Change

 

Total fee revenue

    

 

$9,147

 

    

 

$9,462

 

    

 

(3.3

)% 

Total revenue

    

 

11,712

 

    

 

12,139

 

    

 

(3.5

)% 

Expenses

    

 

8,675

 

    

 

8,625

 

    

 

0.6

Pre-tax margin

    

 

25.8%

 

    

 

28.8%

 

    

 

(300

) bps 

EPS

    

 

6.17

 

    

 

7.21

 

    

 

(14.4

)% 

ROE

    

 

10.8%

 

    

 

13.7%

 

    

 

(290

) bps 

 

  

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($ In millions, except per share data)    2H 2019      1H 2019      Change  

Total fee revenue

   $ 4,627      $ 4,520        2.4

Total revenue

     5,907        5,805        1.8

Expenses

     4,263        4,412        (3.4)

Pre-tax margin

     27.7%        23.9%        380  bps 

EPS

     3.48        2.69        29.4

ROE

     11.9%        9.7%        220  bps 

 

(1)

Financial results are presented on a non-GAAP basis. Non-GAAP financial results adjust selected GAAP-basis financial results to exclude the impact of notable items outside of State Street’s normal course of business. For a reconciliation of non-GAAP measures presented in this proxy statement, see Appendix C.

State Street’s 2019 performance is reviewed in greater detail, along with relevant risks associated with our businesses, results of operations and financial condition, in our 2019 annual report on Form 10-K, which accompanies this proxy statement and was previously filed with the SEC.

 

  

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Director Nominees

We believe that our Board members should have complementary skills and qualifications that form a depth of broad and diverse experiences. We are intent on maintaining the Company’s reputation for quality, integrity and high ethical standards and seek director nominees who have had substantial achievement in their personal and professional pursuits and possess the talent, experience and integrity necessary to effectively oversee our businesses and strategy and enhance long-term shareholder value. Based on these desired attributes, the Board has nominated the following 11 director nominees for election at the 2020 annual meeting of shareholders.

 

Director Nominee         Principal Occupation    Other Public Company
Boards (#)
   State Street Board Roles
and Memberships

Marie A. Chandoha*D

Director Since 2019

  Retired President and Chief Executive Officer, Charles Schwab Investment Management, Inc.    None   

•  Examining and Audit Committee

•  Technology and Operations Committee

Patrick de Saint-Aignan*

Director Since 2009

 

Retired Managing Director and Advisory Director,

Morgan Stanley

   None   

•  Examining and Audit Committee

•  Executive Committee

•  Risk Committee (Chair)

Lynn A. Dugle*

Director Since 2015

  Retired Chief Executive Officer and Chairman, Engility Holdings, Inc.    2   

•  Examining and Audit Committee

•  Executive Committee

•  Technology and Operations Committee (Chair)

Amelia C. Fawcett*

Director Since 2006

  Chairman, Kinnevik AB    1   

•  Lead Director

•  Executive Committee

•  Human Resources Committee

William C. Freda*

Director Since 2014

  Retired Senior Partner and Vice Chairman, Deloitte, LLP    None   

•  Examining and Audit Committee (Chair)

•  Executive Committee

•  Risk Committee

Sara Mathew*

Director Since 2018

  Retired Chairman and Chief Executive Officer, The Dun & Bradstreet Corporation    2   

•  Nominating and Corporate Governance Committee

•  Risk Committee

William L. Meaney*

Director Since 2018

  President, Chief Executive Officer and Director, Iron Mountain Inc.    1   

•  Human Resources Committee

•  Technology and Operations Committee

Ronald P. O’Hanley

Director Since 2019

  Chairman, President and Chief Executive Officer, State Street Corporation    1   

•  Chairman

•  Executive Committee (Chair)

•  Risk Committee

•  Technology and Operations Committee

Sean O’Sullivan*

Director Since 2017

  Retired Group Managing Director and Group Chief Operating Officer, HSBC Holdings, plc    None   

•  Risk Committee

•  Technology and Operations Committee

Richard P. Sergel*

Director Since 1999

  Retired President and Chief Executive Officer, North American Electric Reliability Corporation    1   

•  Examining and Audit Committee

•  Executive Committee

•  Human Resources Committee (Chair)

•  Nominating and Corporate Governance Committee

Gregory L. Summe*

Director Since 2001

  Managing Partner and Founder, Glen Capital Partners, LLC    1   

•  Executive Committee

•  Human Resources Committee

•  Nominating and Corporate Governance Committee (Chair)

*=Independent         D=First-Time Nominee

 

  

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Corporate Governance Summary

Our Board is committed to strong corporate governance practices and is intent on maintaining State Street’s reputation for quality, integrity and high ethical standards. In addition to adhering to the Investor Stewardship Group’s Corporate Governance Framework, as highlighted in Appendix B, the following summarizes our corporate governance standards:

 

LOGO    LOGO    LOGO
Board of Directors    Shareholders Rights and Engagement    Strategy, Compensation and Risk

•   10 of 11 director nominees are independent

 

•   Annual director elections

 

•   Annual assessment of effectiveness and qualifications of each director nominee

 

•   36% of director nominees are women

 

•   Active independent Lead Director elected annually by all independent directors

 

•   Board and committees meet regularly in executive session without management present

 

•   At least 75% attendance by each director at Board and committee meetings

  

•   Directors are elected by a majority of votes cast in uncontested election and by plurality vote in contested elections

 

•   Active shareholder engagement program

 

•   No poison pill

 

•   Proxy access by-law allows shareholders to include director nominees in State Street’s proxy materials

 

•   No supermajority vote requirements relating to common stock

  

•   Board and Committee oversight of:

 

–   strategy, financial performance, ethics and risk management

 

–   CEO and management succession planning

 

–   alignment of culture and human capital management with strategy and long-term objectives

 

•   Directors and executive officers are subject to stock ownership guidelines and are prohibited from short selling, options trading, hedging or speculative transactions in State Street securities

 

•   Incentive compensation subject to clawback, forfeiture and ex ante mechanisms

 

•   Monitor material activities and practices on ESG matters

Information about State Street’s corporate governance practices, is described under the heading “Corporate Governance at State Street.”

 

  

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Corporate Responsibility

State Street’s commitment to social and environmental responsibility and our belief in giving back to the communities in which we live and work are critical to our long-term success. We recognize that sustainable growth comes from operating with absolute integrity and in a way that respects our shareholders, clients, employees, communities and the environment. We firmly believe in the principles of sound governance and helping our clients succeed. We are dedicated to maintaining a global and inclusive workplace where employees feel valued and engaged. We believe we have a responsibility to enrich our communities, and to be a leader in environmental sustainability, both in the way we carry out our operations and in the products and services we offer, and the Board monitors activities and practices on ESG related matters. Corporate responsibility highlights and achievements for 2019 include the following:

 

 

LOGO

Leadership and Governance data is as of April 8, 2020. All other data is as of December 31, 2019.

 

  

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Overview of 2019 Executive Compensation Program

Sound Compensation and Corporate Governance Practices

State Street develops and implements a compensation program for our Named Executive Officers, or NEOs, and other executive officers, which aims to:

 

 

attract, retain and motivate superior executives and drive strong leadership behaviors

 

 

reward those executives for meeting or exceeding individual and company financial and business objectives

 

 

drive long-term shareholder value and financial stability

 

 

align incentive compensation with the performance results experienced by our shareholders through the use of significant levels of deferred equity-based compensation

 

 

provide equal pay for work of equal value

 

 

achieve the preceding goals in a manner aligned with sound risk management and our corporate values

For each of our NEOs identified in the “Compensation Discussion and Analysis,” the Human Resources Committee, which was previously the Executive Compensation Committee, determines the appropriate level of total compensation for the year. We engage with our largest shareholders to understand their perspectives on our compensation and governance programs. For 2019, we engaged or requested engagement with shareholders representing more than half of our outstanding common stock.

The Committee evaluates individual compensation for our NEOs and other executive officers by looking at total direct compensation, consisting of base salary and incentive compensation. The Committee evaluates base salary and incentive compensation levels at least annually.

Base Salary. Base salary is a relatively small portion of total compensation for the NEOs.

Incentive Compensation Targets. The Committee establishes incentive compensation targets for our NEOs each year. The targets are based on each executive’s role and responsibilities, performance trend, competitive and market factors and internal equity.

 

 

 

LOGO

 

 

What We Do

 

•   Long-term performance-based equity awards in the form of performance-based RSUs

 

•   Significant deferred equity- and cash-based incentive compensation

 

•   Active engagement with shareholders on compensation and governance issues

 

•   Close interaction between the Human Resources Committee and our Risk Committee and Examining and Audit Committee

 

•   Independent compensation consultant

 

 

 

 

•   Clawback and forfeiture provisions to permit recoupment of incentive compensation

 

•   “Double-trigger” change-of-control required for deferred incentive compensation acceleration and cash payments

 

•   Stock ownership policy, including holding requirements for NEOs who are below full ownership guidelines

 

•   Non-compete and other restrictive covenants

 

•   Annual review of incentive compensation design for alignment with risk management principles

 

 

 

LOGO

 

 

What We Do Not Do

 

•   No change-of-control excise tax gross-up

 

•   No “single-trigger” change-of-control vesting or cash payments

 

•   No option repricing

 

 

 

 

•   No short-selling, options trading, hedging or speculative transactions in State Street securities

 

•   No tax gross-ups on perquisites(1)

 

•   No multi-year guaranteed incentive awards

 

 

(1)

Excluding certain international assignment and relocation benefits.

More information about executive compensation at State Street is described under the heading “Compensation Discussion and Analysis.”

 

  

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SUMMARY INFORMATION

     i  

LETTER FROM OUR LEAD DIRECTOR

     1  

CORPORATE GOVERNANCE AT STATE STREET

     2  

Governance Guidelines and Independence

     2  

Standards of Conduct

     3  

Board Composition

     3  

Board Leadership Structure

     7  

Meetings of the Board of Directors and Annual Meeting of Shareholders

     9  

Committees of the Board of Directors

     9  

Non-Employee Director Compensation

     11  

Related Person Transactions

     14  

ITEM 1 – ELECTION OF DIRECTORS

     16  

EXECUTIVE COMPENSATION

     24  

Compensation Discussion and Analysis

     24  

Human Resources Committee Report

     48  

CEO Pay Ratio Disclosure

     48  

Alignment of Incentive Compensation and Risk

     48  

Summary Compensation Table

     51  

2019 Grants of Plan-Based Awards

     54  

Outstanding Equity Awards at Fiscal Year-End, December 31, 2019

     57  

2019 Stock Vested

     59  

2019 Pension Benefits

     59  

2019 Nonqualified Deferred Compensation

     61  

Potential Payments upon Termination or Change of Control as of December 31, 2019

     63  

ITEM  2 – APPROVAL OF ADVISORY PROPOSAL ON EXECUTIVE COMPENSATION

     69  

EXAMINING AND AUDIT COMMITTEE MATTERS

     70  

Examining and Audit Committee Pre-Approval Policies and Procedures

     70  

Audit and Non-Audit Fees

     70  

Report of the Examining and Audit Committee

     71  

ITEM  3 – RATIFICATION OF THE SELECTION OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     72  

GENERAL INFORMATION ABOUT THE ANNUAL MEETING

     73  

Questions and Answers About Voting

     73  

Other Matters

     76  

Proposals and Nominations by Shareholders

     76  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     77  

Beneficial Owners

     77  

Management

     78  

Delinquent Section 16(a) Reports

     79  

NOTICE OF AMENDMENT OF BY-LAWS

     79  

APPENDIX A: EXCERPT FROM STATE STREET’S CORPORATE GOVERNANCE GUIDELINES

     A-1  

APPENDIX B: STATE STREET’S GOVERNANCE STANDARDS RELATIVE TO THE INVESTOR STEWARDSHIP GROUP’S CORPORATE GOVERNANCE FRAMEWORK

     B-1  

APPENDIX C: RECONCILIATION OF NON-GAAP MEASURES

     C-1  

 

  

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    2020 NOTICE OF MEETING AND PROXY STATEMENT  

 

LOGO

To our shareholders:

It is my privilege to serve as State Street’s independent Lead Director, and on behalf of the entire Board, I would like to thank all of you for investing in State Street.

2019 was a year of change for State Street as the Board completed its important responsibility of CEO and leadership succession planning by appointing Ron O’Hanley as Chief Executive Officer in January 2019, followed by my election in May to serve as independent Lead Director. In December, the Board appointed Ron as Chairman, after careful assessment and review of our Board leadership structure. This structure includes my role as independent Lead Director, which is similar to that of an independent Chair at many firms and includes my responsibilities to preside over Board meetings when the Chairman is not present, oversee Board and committee agendas, attend all committee meetings and work closely with the CEO. We are at a pivotal moment in State Street’s evolution, and I and the independent directors are thoughtfully engaging with Ron and his management team to oversee the implementation of our strategy and to maintain a focus on delivering long-term value for our shareholders.

In doing so, the Board is committed to strong corporate governance practices and in maintaining State Street’s reputation for quality, integrity and high ethical standards. The Board is assisted in this by our Corporate Governance Guidelines. These Guidelines define director qualification and independence standards, expectations for the Lead Director, pathways to communicate with the Board and other processes. In addition, they identify specific functions of the Board. These include reviewing the alignment of State Street’s culture with its strategy and monitoring its material activities and practices regarding environmental, social and governance matters, in addition to more traditional business and management oversight responsibilities.

As one of the largest servicers and managers of assets in the world, State Street understands the importance of effective, independent board leadership. As part of our commitment to effective governance, the Board actively evaluates its composition to reflect a balanced combination of skills, experience and diverse perspectives. In October 2019, we added to the strength and breadth of the Board with the election of Marie A. Chandoha, retired President and CEO of Charles Schwab Investment Management. As Marie joins the Board, my predecessor in the role of Lead Director, Ken Burnes, will not be standing for reelection this year. In his 17 years as a member of the Board, Ken has exemplified leadership, acumen and commitment to the Company and its shareholders, overseeing State Street’s navigation through growth and transformation. The Board and I especially thank him for his strength and dedication.

Once again, on behalf of the Board, I want to thank you for your continued support and interest in State Street and we look forward to the 2020 Annual Meeting of Shareholders.

Sincerely,

 

LOGO

Amelia C. Fawcett

Lead Director

 

  

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    2020 NOTICE OF MEETING AND PROXY STATEMENT  

 

 

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be Held on May 20, 2020

The proxy statement and annual report, and the means to vote electronically, are available at www.proxyvote.com. To view this material, you must have available the 16-digit control number located on the notice mailed on April 8, 2020, on the proxy card or, if shares are held in the name of a broker, bank or other nominee, on the voting instruction form.

Corporate Governance at State Street

Governance Guidelines and Independence

State Street’s Board of Directors, or Board, in its role of overseeing the conduct of our business, is guided by our Corporate Governance Guidelines, or the Guidelines. Among other things, the Guidelines describe the role of the Board, its responsibilities and functions, the director qualification and selection process and the role of the Lead Director. The Guidelines also contain categorical standards for determining director independence under New York Stock Exchange, or NYSE, listing standards. In general, a director would not be independent under these standards if the director (and in certain circumstances, a member of the director’s immediate family) has, or in the past three years had, specified relationships or affiliations with State Street, its external or internal auditors or other companies that do business with State Street (including employment by State Street, receipt of a specified level of direct compensation from State Street—other than director fees—and compensation committee interlocks). The categorical standards also provide specified relationships that, by themselves, would not impair independence. The portion of the Guidelines addressing director independence is attached as Appendix A to this proxy statement. The full Guidelines are available under the “Corporate Governance” section in the “For Our Investors” section of our website at www.statestreet.com. In addition to the Guidelines, the charters for each principal committee of the Board are available in the same location on our website. State Street also follows the governance standards relative to the Investor Stewardship Corporate Governance Group’s (ISG) framework for U.S. listed companies. State Street’s alignment with the ISG framework is attached as Appendix B to this proxy statement.

 

 

Independent Director Governance

 

   

The independent directors meet in an executive session presided by the independent Lead Director at every regularly scheduled meeting of the Board and otherwise as needed

 
   

The meetings of the independent directors promote additional opportunities, outside the presence of management, for the directors to engage together in discussion. The regularity of these meetings fosters continuity for these discussions and allows for a greater depth and scope to the matters discussed

 

Pursuant to the Guidelines, the Board undertook its annual review of director independence in early 2020. State Street, as a global financial institution and one of the largest providers of financial services to institutional investors, conducts business with many organizations throughout the world. Our directors or their immediate family members may have relationships or affiliations with some of these organizations. As provided in the Guidelines, the purpose of the director independence review was to determine whether any relationship or transaction was inconsistent with a determination that the director was independent. As a result of this review, the Board, after review and recommendation by the Nominating and Corporate Governance Committee, determined that all of our directors, with the exception of Mr. O’Hanley, meet the categorical standards for independence under the Guidelines, have no material relationship with State Street (other than the role of director) and satisfy the qualifications for independence under listing standards of the NYSE.

In making the independence determinations in 2020, the Board considered that the below identified individuals, or their respective family members, have the following relationships or arrangements that are deemed to be immaterial under the categorical standards for independence included in the Guidelines:

 

 

commercial or charitable relationships with an entity for which the State Street director or family member serves as a non-employee director, and with respect to which the director was uninvolved in negotiating such relationship (Ms. Mathew and Messrs. Burnes and Freda)

 

 

commercial relationships with an entity for which the State Street director or family member serves as an employee, consultant or executive officer where the director does not receive any special benefits from the transaction and the annual payments to or from the entity are equal to or less than the greater of $1 million or 2% of the consolidated gross annual revenues of the other entity during the most recent completed fiscal year (Messrs. Freda and Meaney)

 

  

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In 2019, none of these commercial or charitable relationships with affiliated entities involved amounts paid or received by State Street exceeding the greater of $1 million or 0.6% of the affiliated entity’s annual gross revenue.

Standards of Conduct

We have a Standard of Conduct for Directors, which together with the Standard of Conduct for Employees, promotes ethical conduct and the avoidance of conflicts of interest in conducting our business. We also have a Code of Ethics for Senior Financial Officers (including the Chief Executive Officer), as required by the Sarbanes-Oxley Act and SEC rules. Each of these documents is available under the “Corporate Governance” section in the “For Our Investors” section of our website at www.statestreet.com. Only our Board may grant a waiver for directors, senior financial officers or executive officers from a provision of the Standard of Conduct for Directors, the Standard of Conduct for Employees or the Code of Ethics for Senior Financial Officers, and any waivers will be posted under the “Corporate Governance” section in the “For Our Investors” section of our website at www.statestreet.com.

Board Composition

In connection with nominating directors for election each year and evaluating the need for new director candidates as appropriate, including skill sets, diversity, specific business background and global or international experience, the Nominating and Corporate Governance Committee, with input from the entire Board and management, focuses on the Board’s capabilities and functioning as a whole.

 

 

Director Nominee Characteristics and Qualifications

The Board expects all directors and director nominees to possess the following attributes or characteristics:

 

   

unquestionable business ethics, irrefutable reputation and superior moral and ethical standards

 
   

informed and independent judgment with a balanced perspective, financial literacy, mature confidence, high performance standards and incisiveness

 
   

ability and commitment to attend Board and committee meetings and to invest sufficient time and energy in monitoring management’s conduct of the business and compliance with State Street’s operating and administrative procedures

 
   

a global vision of business with the ability and willingness to work closely with the other Board members

 

Taken as a whole, the Board expects one or more of its members to have the following skill sets, specific business background and global or international experience:

 

   

experience in the financial services industry

 
   

experience as a senior officer of a well-respected public company

 
   

experience as a senior business leader of an organization active in our key international growth markets

 
   

experience in key disciplines of significant importance to State Street’s overall operations

 
   

qualification as an audit committee financial expert

 
   

qualification as a risk management expert

 

 

  

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Annual Director Evaluations

The Nominating and Corporate Governance Committee annually assesses each director’s performance and contributions to the overall effectiveness of the Board. The Committee discusses each director and using the evaluation criteria illustrated below measures each director’s performance. Based on the results of the evaluation, the Board believes that each of the director nominees has substantial achievement in his or her personal and professional pursuits and has talents, experience, judgement and integrity that will contribute to the best interests of State Street and to long-term shareholder value. The nominees as a group possess the skill sets, specific business background and global or international experience that the Board desires. The director nominee biographies set forth in this proxy statement under the heading “Item 1—Election of Directors” indicate each nominee’s qualifications, skills, experience and attributes that led the Board to conclude he or she should serve as a director of State Street.

 

LOGO

Annual Board and Committee Self-Evaluation

In addition, the Board and each Board committee conducts an annual self-evaluation of its performance and effectiveness. Directors complete a questionnaire evaluating the Board and each committee on which they serve, specifically focusing on areas of potential improvement. The overall performance of the Board—including its contributions to State Street—and a compilation of director responses is reviewed and discussed by the Nominating and Corporate Governance Committee and by the full Board. Similarly, the performance of each committee, along with specific committee member responses, is reviewed and discussed by the respective committee. The Nominating and Corporate Governance Committee further assesses whether each of the Examining and Audit Committee, Human Resources Committee, Nominating and Corporate Governance Committee, Risk Committee and Technology and Operations Committee has a functioning self-evaluation process and reports its findings to the Board. The Nominating and Corporate Governance Committee concluded, that for 2019, each of the respective committees had a functioning self-evaluation process.

 

  

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Director Identification and Selection Process

The Board regularly reviews its composition and size to evaluate its overall effectiveness and alignment with Company strategy. As part of this review, the Nominating and Corporate Governance Committee, in conjunction with the Board, establishes the desired criteria, skills and areas of expertise needed to continue to support the Board in advancing the Company’s businesses and strategy. Once the desired characteristics are established, the Committee reviews each director candidate. Illustrated below is an overview of the process used to identify the desired attributes and to select new candidates for the Board.

 

LOGO

Ms. Marie Chandoha is a first-time nominee for election as a director by shareholders at the 2020 annual meeting. Ms. Chandoha was first identified by a third-party search firm that was retained to identify potential director candidates. At the request of the Nominating and Corporate Governance Committee, the search firm first discussed with the members of the Committee the priority characteristics of a new director candidate, in light of the preferred individual and Board qualities discussed above. The search firm provided the Committee a list of candidates who were interested in State Street and who met the selection criteria, experience and characteristics, and the Chairman of the Board, Chair of the Nominating and Corporate Governance Committee and select members of the Committee and Board personally conducted interviews. The Board is nominating Ms. Chandoha as she meets several of the criteria identified by the Board for new directors, including Ms. Chanodha’s extensive leadership experience in the financial services industry and track record of transforming businesses. Both the Nominating and Corporate Governance Committee and the Board of Directors believes that Ms. Chandoha has the background and requisite experience to make significant contributions on many levels to State Street through her continued service as a director. Ms. Chandoha was deemed independent by the Board under the Corporate Governance Guidelines.

In carrying out its responsibility to identify the best qualified candidates for directors, the Nominating and Corporate Governance Committee will consider proposals for nominees from a number of sources, including recommendations from shareholders submitted upon written notice to the Chair of the Nominating and Corporate Governance Committee, c/o the Office of the Secretary of State Street Corporation, One Lincoln Street, Boston, Massachusetts 02111 (facsimile number (617) 664-8209). The Committee seeks to identify individuals qualified to become directors, consistent with the identified criteria.

By following the procedures set forth under “General Information About the Annual Meeting—Proposals and Nominations by Shareholders,” shareholders also have the right under our by-laws to directly nominate director candidates and, in certain circumstances, to have their nominees included in State Street’s proxy statement.

 

  

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Director Nominee Qualifications, Diversity and Skills

We believe that our Board of Directors should have a variety of qualifications, skill sets and experience that, when taken as a whole, best serve the Company and our shareholders. We recognize the importance of diversity with regard to the composition of the Board and strive to have a Board that provides diversity of thought and a broad range of perspectives. In an effort to achieve these objectives, the Nominating and Corporate Governance Committee and the Board consider a wide range of attributes when determining and assessing director nominees and new candidates, including personal and professional backgrounds, gender, race, national origin and tenure of Board service. The Nominating and Corporate Governance Committee is committed to considering diversity in its director candidate recommendations. The Committee does not assign specific weight to the various factors it considers and no particular criterion is a prerequisite for nomination. As summarized below, each of our directors brings to the Board a variety of qualifications and skills and, collectively, these qualifications form a depth of broad and diverse experiences that help the Board effectively oversee our activities and operations.

 

LOGO

 

  

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LOGO

 

Board Leadership Structure

Leadership Transition

During the past year, the Company completed its leadership transition. On January 1, 2019, Ronald P. O’Hanley assumed the role of Chief Executive Officer and effective January 1, 2020, he was appointed as Chairman of the Board. In addition to serving as Chairman and Chief Executive Officer, Mr. O’Hanley has served as President since November 2017.

Board Governance

State Street’s leadership structure includes an independent Lead Director of the Board. This position is currently held by Amelia C. Fawcett. Dame Amelia was elected Lead Director in May 2019 for a term that expires in May 2020.

As Chairman, Mr. O’Hanley presides at all meetings of the Board of Directors during which he is present and he works with the independent Lead Director to establish the agendas for these meetings and matters on which the Board will vote.

 

 

Role of the Independent Lead Director

 

   

Elected annually by the independent directors to serve a one-year term

 
   

Expected to participate in, and attend, meetings of all of the Board’s committees, providing valuable committee membership overlap to enable optimal agenda coordination, insight and consistency across all committees

 
   

Presides at all meetings of the Board during which the Chairman is not present, including all executive sessions of independent directors

 
   

Serves as a liaison between the Chairman and the independent directors

 
   

Authorized to call additional meetings of the independent directors

 
   

Conducts an annual process for reviewing the Chief Executive Officer’s performance and reports the results of the process to the other independent directors

 
   

Communicates with the Chairman to provide feedback and implement the decisions and recommendations of the independent directors

 
   

Represents the Board in discussions with stakeholders and communicates with regulators

 
   

Approves, in consultation with the Chairman, the agendas for Board meetings and information sent to the Board and the matters voted on by the full Board

 

 

  

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Board Leadership Review Process

The Nominating and Corporate Governance Committee coordinates the annual independent Lead Director nomination and election process. In addition, the Board of Directors reviews the Board leadership structure at least annually to assess and determine the appropriate structure for the Company. The Board values the flexibility to permit frequent review and determination of the appropriate leadership structure based on the opportunities and circumstances of the Company at any given time.

After the independent directors’ review and assessment, the Board of Directors believes that Mr. O’Hanley’s role as Chairman, together with a strong independent Lead Director, is currently the most effective leadership structure for State Street and is in the best interests of the Board, State Street and its shareholders.

Among the factors considered by the Board in determining that the current leadership structure is the most appropriate are:

 

 

as our Chief Executive Officer, and with his experience in various leadership roles at State Street, Mr. O’Hanley has extensive knowledge of our business and strategy and is well positioned to work with the independent Lead Director to focus our Board’s agenda on the key issues facing State Street

 

 

oversight of State Street is the responsibility of our Board as a whole, which maintains a majority of independent directors (10 out of 11 director nominees), and this responsibility can be properly discharged with a strong, active and engaged independent Lead Director

 

 

the Chairman and independent Lead Director work together to play a strong and active role in the oversight of State Street’s business strategy and operational management

Communication with the Board of Directors

Shareholders and interested parties who wish to contact the Board of Directors or the Lead Director should address correspondence to the Lead Director in care of the Secretary. The Secretary will review and forward correspondence to the Lead Director or appropriate person or persons for response.

Lead Director of State Street Corporation

c/o Office of the Secretary

One Lincoln Street

Boston, MA 02111

In addition, State Street has established a procedure for communicating directly with the Lead Director, by utilizing a third-party independent provider, regarding concerns about State Street or its conduct, including complaints about accounting, internal accounting controls or auditing matters. An interested party who wishes to contact the Lead Director may use any of the following methods, which are also described on State Street’s website at www.statestreet.com:

 

LOGO

For country-specific phone numbers, please visit www.statestreet.com.

The Lead Director may forward to the Examining and Audit Committee, or to another group or department, for appropriate review, any concerns the Lead Director receives. The Lead Director periodically reports to the independent directors as a group regarding concerns received.

 

  

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Meetings of the Board of Directors and Annual Meeting of Shareholders

During 2019, the Board of Directors held 8 meetings, and each of the incumbent directors attended at least 75 percent of the total of all meetings of the Board and committees for such period as the director served. Although State Street does not have a formal policy regarding attendance of directors at the annual meeting of shareholders, all directors are encouraged to attend. Each of the 12 directors on the Board at the time of our 2019 annual meeting of shareholders attended the meeting.

Committees of the Board of Directors

The Board of Directors has the following principal committees to assist it in carrying out its responsibilities, and each operates under a written charter, a copy of which is available under the “Corporate Governance” section in the “For Our Investors” section of our website at www.statestreet.com. The charter for each committee, which establishes its roles and responsibilities and governs its procedures, is annually reviewed and approved by the Board.

Examining and Audit Committee

 

 

 

 

Current Members:

•   William C. Freda, Chair

•   Marie A. Chandoha

•   Patrick de Saint-Aignan

•   Lynn A. Dugle

•   Richard P. Sergel

 

11 Meetings in 2019

  

Primary Responsibilities:

 

•   Responsible for the appointment (including qualifications, performance, independence and periodic consideration of retaining a different firm), compensation, retention, evaluation and oversight of the work of State Street’s independent registered public accounting firm, including sole authority for the establishment of pre-approval policies and procedures for all audit engagements and any non-audit engagements

 

•   Discusses with the independent auditor critical accounting policies and practices, alternative treatments of financial information, the effect of regulatory and accounting initiatives and other relevant matters

 

•   Oversees the operation of our system of internal control covering the integrity of our consolidated financial statements and reports; compliance with laws, regulations and corporate policies; and the performance of corporate audit

 

•   Reviews the effectiveness of State Street’s compliance program and conducts an annual performance evaluation of the General Auditor, the Chief Compliance Officer and other senior members of management as appropriate

 

•   Oversees the Company’s efforts to promote and advance a culture of compliance and ethical business practices

    

 

 

 

 

 

 

All members meet the independence requirements of the listing standards of the NYSE and the rules and regulations of the SEC and are considered audit committee financial experts (as defined by SEC rules).

 

 

 

  

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Executive Committee

 

 

 

 

Current Members:

•   Ronald P. O’Hanley, Chair

•   Patrick de Saint-Aignan

•   Lynn A. Dugle

•   Amelia C. Fawcett

•   William C. Freda

•   Richard P. Sergel

•   Gregory L. Summe

 

0 Meetings in 2019

  

Primary Responsibilities:

 

•   Committee members are the Chairs of each Committee, the independent Lead Director and Chairman of the Board and are authorized to exercise all the powers of the Board, except as otherwise limited by the laws of the Commonwealth of Massachusetts or the Committee’s charter

 

•   Reviews, approves and acts on matters on behalf of the Board at times when it is not practical to convene a meeting of the Board to address such matters

 

•   Depending on meeting activities, if any, periodically reports to the Board

 

Human Resources Committee

 

 

 

 

Current Members:

•   Richard P. Sergel, Chair*

•   Kennett F. Burnes

•   Amelia C. Fawcett

•   William L. Meaney

•   Gregory L. Summe

 

8 Meetings in 2019

 

*Sara Mathew, Chair-elect

(effective May 2020)

  

Primary Responsibilities:

 

•   Oversees human capital management strategies, the operation of all compensation plans, policies and programs in which executive officers participate and certain other incentive, retirement, health and welfare and equity plans in which other employees participate

 

•   Oversees the alignment of our incentive compensation arrangements with the safety and soundness of State Street, including the integration of risk management objectives and related policies, arrangements and control processes, consistent with applicable regulatory rules and guidance

 

•   Acting together with the other independent directors, annually reviews and approves corporate goals and objectives relevant to the Chief Executive Officer’s compensation; evaluates the Chief Executive Officer’s performance; and reviews, determines and approves, in consultation with the other independent directors, the Chief Executive Officer’s compensation

 

•   Reviews, evaluates and approves the total compensation of all executive officers

 

•   Approves the terms and conditions of employment and any changes thereto, including any restrictive provisions, severance arrangements and special arrangements or benefits, of any executive officer

 

•   Adopts equity grant guidelines in connection with its overall responsibility for all equity plans and monitors stock ownership of executive officers

 

•   Appoints and oversees compensation consultants and other advisors retained by the Committee

All members meet the independence requirements of the listing standards of the NYSE.

 

 

 

  

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Nominating and Corporate Governance Committee

 

 

 

 

Current Members:

•   Gregory L. Summe, Chair

•   Kennett F. Burnes

•   Sara Mathew

•   Richard P. Sergel

 

5 Meetings in 2019

  

Primary Responsibilities:

 

•   Assists the Board with respect to issues and policies affecting our governance practices, including management succession planning, identifying and recommending director nominees and shareholder matters

 

•   Recommends each committee’s composition and leads the Board in its annual review of the Board’s and each committee’s performance

 

•   Reviews and approves State Street’s related person transactions, reviews the amount and form of director compensation and reviews reports on regulatory, political and lobbying activities of State Street

All members meet the independence requirements of the listing standards of the NYSE.

 

 

Risk Committee

 

 

 

 

Current Members:

•   Patrick de Saint-Aignan, Chair

•   William C. Freda

•   Ronald P. O’Hanley

•   Sara Mathew

•   Sean O’Sullivan

 

9 Meetings in 2019

  

Primary Responsibilities:

 

•   Oversees the operation of our global risk management framework, including the risk management policies for our operations

 

•   Reviews the management of all risk applicable to our operations, including credit, market, interest rate, liquidity, operational, technology, business, compliance and reputation risks

 

•   Oversees our strategic capital governance principles and controls, monitors capital adequacy in relation to risk and discharges the duties and obligations of the Board under applicable Basel, Comprehensive Capital Analysis and Review, Comprehensive Liquidity Assessment and Review and resolution and recovery planning requirements

 

•   Conducts an annual performance evaluation of the Chief Risk Officer

 

Technology and Operations Committee

 

 

 

 

Current Members:

•   Lynn A. Dugle, Chair

•   Kennett F. Burnes

•   Marie A. Chandoha

•   William L. Meaney

•   Ronald P. O’Hanley

•   Sean O’Sullivan

 

8 Meetings in 2019

  

Primary Responsibilities:

 

•   Oversees technology and operational risk management and the role of these risks in executing the Company’s strategy in support of the Company’s global business requirements

 

•   Reviews material strategic initiatives from a technology and operational risk perspective

 

•   Reviews technology related risks, including corporate information security, cybersecurity and data management

 

Non-Employee Director Compensation

General

The Nominating and Corporate Governance Committee annually reviews, and recommends to the Board, the form and amount of non-employee director compensation. In conducting its review, the Committee uses the same peer group the Human Resources Committee uses for executive compensation generally and, like the Human Resources Committee, used the services of Meridian Compensation Partners for 2019. Information on State Street’s peer group and compensation consultant is described under the heading “Executive Compensation—Compensation Discussion and Analysis—Other Elements of Our Process.”

 

  

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The Committee did not treat peer group data as definitive when determining non-employee director compensation. Rather, it referenced peer group compensation as well as trends in director compensation generally and within the industry and formed its own perspective on compensation for our non-employee directors. In 2019, the Committee made its recommendation to the Board, which, following the May 2019 annual meeting of shareholders, approved director compensation for all non-employee directors effective through the 2020 annual meeting of shareholders. Mr. O’Hanley, as an employee director, does not receive any additional compensation for his services as a director.

Compensation

For the 2019–2020 Board year (the period between the 2019 and 2020 annual meetings of shareholders) the non-employee directors receive the following compensation:

 

Compensation Component(1)    Value ($)(2)      Vehicle(3)

Annual Retainer

   $ 90,000      Cash or shares of State Street common stock

Annual Equity Award

     195,000      Shares of State Street common stock

Additional Independent Lead Director Retainer

     125,000      Cash or shares of State Street common stock

Examining and Audit Committee and Risk Committee Chair Retainers

     30,000      Cash or shares of State Street common stock

Human Resources Committee Chair Retainer

     25,000      Cash or shares of State Street common stock
Nominating and Corporate Governance Committee and Technology and Operations Committee Chair Retainers      20,000      Cash or shares of State Street common stock

Examining and Audit Committee and Risk Committee Member Retainers(4)

     20,000      Cash or shares of State Street common stock

 

(1)

A Board meeting fee of $1,500 applies after the 10th Board meeting attended during the Board year. Non-employee directors also receive reimbursement of expenses incurred as a result of Board service.

(2)

The annual retainer and annual equity award are pro-rated for any non-employee director joining the Board after the annual meeting. Committee retainers are pro-rated for any non-employee director joining a committee during the Board year.

(3)

For non-employee directors elected at the annual meeting, all awards made in shares of State Street common stock are granted based on the closing price of our common stock on the NYSE on the date of the annual meeting that begins the period, rounded up to the nearest whole share, unless otherwise noted. Under the 2017 Stock Incentive Plan, with limited exceptions, the total value of all compensation components to a non-employee director cannot exceed $1.5 million in a calendar year.

(4)

The Examining and Audit Committee and Risk Committee member retainer is payable to each member other than the Lead Director and each committee’s chair.

For his service as Non-Executive Chairman during the 2019 calendar year, Mr. Hooley, our former Chief Executive Officer, received a cash annual retainer of $250,000 in January 2019 and an award of State Street common stock of $250,000, based on the closing price of our common stock on the NYSE on May 15, 2019, rounded up to the nearest whole share. These amounts were intended to recognize that the Non-Executive Chairman would serve for a limited duration and preside at all meetings of the Board of Directors during which he was present; work with the Chief Executive Officer and independent Lead Director to establish the agendas for Board meetings; serve as a resource to senior management and the Board on a variety of matters, including strategy, operations and stakeholder relations; and help guide the leadership transition.

Pursuant to State Street’s Deferred Compensation Plan for Directors, non-employee directors may elect to defer the receipt of 0% or 100% of their (1) retainers, (2) annual equity award and/or (3) meeting fees. Non-employee directors also may elect to receive their retainers in cash or shares of State Street common stock. Non-employee directors who elect to defer the cash payment of their retainers or meeting fees may choose from four notional investment fund returns for such deferred cash. Deferrals of common stock are adjusted to reflect the hypothetical reinvestment in additional shares of common stock for any dividends or other distributions on State Street common stock. Deferred amounts will be paid (a) as elected by the non-employee director, on either the date of the conclusion of service on the Board or on the earlier of such conclusion and a future date specified, and (b) in the form elected by the non-employee director as either a lump sum or in installments over a two- to five-year period.

 

  

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Director Stock Ownership Guidelines

Under our stock ownership guidelines, all non-employee directors are required to maintain a target level of stock ownership equal to 8 times the annual retainer of $90,000 for a total of $720,000. Non-employee directors must hold all net shares received until they reach the target ownership level. For purposes of these stock ownership guidelines, the value of shares owned is based on the closing price of our common stock on the NYSE on the date that we use for the beneficial ownership table below under the heading “Security Ownership of Certain Beneficial Owners and Management.” Non-employee directors are credited with all shares they beneficially own for purposes of the beneficial ownership table, which includes all shares awarded as director compensation, including share awards that have been deferred. Non-employee directors are expected to attain the ownership level ratably over a five-year period.

Our Securities Trading Policy prohibits directors from short selling State Street securities, engaging in hedging transactions in State Street securities and engaging in speculative trading of State Street securities.

As of March 2, 2020, Mses. Chandoha and Mathew and Messrs. Meaney and O’Sullivan exceeded the pro-rated expected level of ownership but are below the full target ownership level, and therefore subject to the holding requirement. Each of the other non-employee directors exceeded the full target level of ownership under the guidelines.

2019 Director Compensation

The following table shows the compensation our non-employee directors earned for their services in 2019:

 

Name    Fees Earned
or Paid in
Cash
($)
     Stock  Awards(1)
($)
     All Other
Compensation(2)
($)
     Total
($)
 
(a)    (b)      (c)      (g)      (h)  

Kennett F. Burnes

   $ 90,000      $ 195,011      $ 40,752      $ 325,763  

Marie A. Chandoha(3)

     71,667        130,021               201,688  

Patrick de Saint-Aignan

     140,000        195,011        40,752        375,763  

Lynn A. Dugle

     130,000        195,011        32,345        357,356  

Amelia C. Fawcett

     215,000        195,011               410,011  

William C. Freda

     140,000        195,011        40,752        375,763  

Joseph L. Hooley(4)

     250,000        250,021        80,100        580,121  

Sara Mathew

     110,000        195,011               305,011  

William L. Meaney

     90,000        195,011        35,345        320,356  

Sean P. O’Sullivan

     110,000        195,011               305,011  

Richard P. Sergel

     135,000        195,011        29,999        360,010  

Gregory L. Summe

     110,000        195,011        40,486        345,497  

 

(1)

On May 15, 2019, each non-employee director, except Mr. Hooley and Ms. Chandoha, received 3,155 shares of State Street common stock valued at $195,011 based on the closing price of our common stock on the NYSE of $61.81. Stock awards to non-employee directors vest immediately, and there were no unvested non-employee director stock awards as of December 31, 2019.

 

  

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(2)

Perquisites received in 2019 include director life insurance coverage and business travel accident insurance paid for by State Street ($752 for Messrs. Burnes, de Saint-Aignan, Freda and Sergel; $486 for Messrs. Hooley and Summe; and $345 for Ms. Dugle and Mr. Meaney). Charitable contributions by non-employee directors are eligible for a Company matching contribution of up to $40,000 per calendar year under the State Street matching gift program. Matching charitable contributions made on behalf of the non-employee directors during 2019 were $40,000 for Messrs. Burnes, de Saint-Aignan, Freda, Hooley and Summe; $35,000 for Mr. Meaney; $32,000 for Ms. Dugle; and $29,247 for Mr. Sergel. Mr. Hooley’s perquisites also include company car and driver ($14,225) and personal and home security ($25,389). The total amount of perquisites and other personal benefits for Dame Amelia, Mses. Chandoha and Mathew and Mr. O’Sullivan have not been reported because the total did not exceed $10,000.

(3)

Ms. Chandoha joined the Board in September 2019. For her service through the 2020 annual meeting of shareholders, she received a pro-rated annual retainer of $60,000 in cash and a pro-rated annual equity award of 2,128 shares of State Street common stock with a total value of $130,021 based on the closing price of our common stock on the NYSE on September 19, 2019 of $61.10. Ms. Chandoha was appointed to the Examining and Audit Committee in October 2019 and for her service through the 2020 annual meeting, she received a pro-rated member retainer of $11,667 in cash.

(4)

For his service as Non-Executive Chairman during 2019, Mr. Hooley, our former CEO, received a $250,000 cash retainer in January 2019 and 4,045 shares of State Street common stock valued at $250,021 based on the May 15, 2019 closing price of our common stock on the NYSE of $61.81. The table does not include compensation awarded to Mr. Hooley in 2019 related to his service as State Street’s Chief Executive Officer during 2018: 40,261 deferred stock awards valued at approximately $2,720,000; 61,344 performance-based restricted stock units valued at approximately $4,080,000; and previously disclosed deferred value awards and immediate cash awarded to Mr. Hooley on March 1, 2019. These awards remain subject to the vesting schedules, recourse mechanisms, restrictive covenants and other terms and conditions described in the proxy statement for State Street’s 2019 annual meeting of shareholders. The table also excludes dividend credits of $61,497 Mr. Hooley earned in 2019 on his outstanding deferred value awards granted for his service as State Street’s Chief Executive Officer. Mr. Hooley retired as Non-Executive Chairman of the Board on December 31, 2019.

Related Person Transactions

The Board has adopted a written policy and procedures for the review of any transaction, arrangement or relationship in which State Street is a participant, the amount involved exceeds $120,000 and one of our executive officers, directors or 5% shareholders (or their immediate family members), who we refer to as “related persons,” has a direct or indirect material interest. A related person proposing to enter into such a transaction, arrangement or relationship must report the proposed related-person transaction to State Street’s Chief Legal Officer. The policy calls for the proposed related-person transaction to be reviewed and, if deemed appropriate, approved by the Nominating and Corporate Governance Committee. A related-person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the Nominating and Corporate Governance Committee (or the Committee Chair) after full disclosure of the related person’s interest in the transaction. Whenever practicable, the reporting, review and approval will occur prior to the transaction. If advance review is not practicable or was otherwise not obtained, the Committee will review and, if deemed appropriate, ratify the related-person transaction. The policy also permits the Committee Chair to review and, if deemed appropriate, approve proposed related-person transactions that arise between Committee meetings, in which case they will be reported to the full Committee at its next meeting. Any ongoing related-person transactions are reviewed annually.

 

 

Considerations

As appropriate for the circumstances, the Nominating and Corporate Governance Committee (or the Committee Chair) will review and consider:

 

   

the related person’s interest in the related-person transaction

 
   

the approximate dollar value of the amount involved in the related-person transaction

 
   

the approximate dollar value of the related person’s interest in the transaction without regard to any profit or loss

 
   

whether the transaction was undertaken in the ordinary course of State Street’s business

 
   

whether the transaction with the related person is on terms no less favorable to State Street than terms that could be reached with an unrelated third-party

 
   

the purpose of the transaction and the potential benefits to State Street

 
   

any other information regarding the related-person transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction

 

The Nominating and Corporate Governance Committee may approve or ratify the related-person transaction only if the Committee determines that, under all of the circumstances, the transaction is in, or is not inconsistent with, State Street’s best interests. The Committee may, in its sole discretion, impose such conditions as it deems appropriate on State Street or the related person in connection with approval of the related-person transaction.

 

  

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    2020 NOTICE OF MEETING AND PROXY STATEMENT  

 

In addition to the transactions that are excluded by the instructions to the SEC’s related-person transaction disclosure rule, the Board has determined that the following transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related-person transactions for purposes of this policy:

 

 

interests arising solely from the related person’s position as an executive officer, employee or consultant of another entity (whether or not the person is also a director of such entity) that is a party to the transaction, where (1) the related person and his or her immediate family members do not receive any special benefits as a result of the transaction and (2) the annual amount involved in the transaction equals less than the greater of $1 million or 2% of the consolidated gross revenues of the other entity that is a party to the transaction during that entity’s last completed fiscal year; or

 

 

a transaction that involves discretionary charitable contributions from State Street to a tax-exempt organization where a related person is a director, trustee, employee or executive officer, provided the related person and his or her immediate family members do not receive any special benefits as a result of the transaction, and further provided that, where a related person is an executive officer of the tax-exempt organization, the amount of the discretionary charitable contributions in any completed year in the last 3 fiscal years is not more than the greater of $1 million, or 2% of that organization’s consolidated gross revenues in the last completed fiscal year of that organization (in applying this test, State Street’s automatic matching of director or employee charitable contributions to a charitable organization will not be included in the amount of State Street’s discretionary contributions)

Based on information provided by the directors and executive officers, and obtained by the legal department, no related-person transactions are required to be reported in this proxy statement under applicable SEC regulations. In addition, neither State Street nor the Bank has extended a personal loan or extension of credit to any of its directors or executive officers.

 

  

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    2020 NOTICE OF MEETING AND PROXY STATEMENT  

 

Item 1 – Election of Directors

 

 

The Board of Directors unanimously recommends that you vote

FOR

each of the nominees for director (Item 1 on your proxy card)

 

Each director elected at the 2020 annual meeting of shareholders will serve until the next annual meeting of shareholders, except as otherwise provided in State Street’s by-laws. Of the 11 director nominees, 10 are independent, non-management directors and one serves as the Chief Executive Officer of State Street. All of the non-management directors are independent, as determined by the Board under the applicable definition in the NYSE listing standards and the State Street Corporate Governance Guidelines.

Pursuant to State Street’s by-laws, on February 20, 2020, the Board fixed the number of directors at 11 as of the 2020 annual meeting of shareholders. Unless contrary instructions are given, shares represented by proxies solicited by the Board of Directors will be voted for the election of the 11 director nominees listed below. We have no reason to believe that any nominee will be unavailable for election at the annual meeting. In the event that one or more nominees is unexpectedly not available to serve, proxies may be voted for another person nominated as a substitute by the Board or the Board may reduce the number of directors to be elected at the annual meeting. Information relating to each nominee for election as director is described below, including:

 

 

age and period of service as a director of State Street

 

 

business experience during at least the past five years (including directorships at other public companies)

 

 

community activities

 

 

other experience, qualifications, attributes or skills that led the Board to conclude the director should serve or continue to serve as a director of State Street

The Board of Directors recommends that shareholders approve each director nominee for election based upon the qualifications and attributes discussed below. See “Corporate Governance at State Street—Board Composition” for a further discussion of the Board’s process and reasons for nominating these candidates.

 

  

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  Item 1 (cont.)

 

    2020 NOTICE OF MEETING AND PROXY STATEMENT  

 

LOGO

 

 

MARIE A. CHANDOHA

Age 58, Director since 2019

 

Board Roles and Committees

 

•   Examining and Audit Committee

 

•   Technology and Operations Committee

  

 

Career Highlights

 

•   Retired President and Chief Executive Officer, Charles Schwab Investment Management, Inc., the investment management subsidiary of Charles Schwab Corporation, an NYSE-listed brokerage and wealth management firm (2010 to 2019); Chief Investment Officer (2010)

 

•   Former Managing Director, Head, ETF, Index and Model-Based Fixed Income Portfolio Management, BlackRock, Inc., an investment management company (2009 to 2010); Global Head, Fixed Income Business, Barclays Global Investors (2007 to 2009) prior to acquisition by BlackRock, Inc.

 

•   Former Co-Head and Senior Portfolio Manager of the Montgomery Fixed Income Division, Wells Capital Management, an investment management company (1999 to 2007)

 

Qualifications and Attributes

 

In her prior role as President and Chief Executive Officer of Charles Schwab Investment Management, Inc., Ms. Chandoha implemented a new vision of the business by reorganizing the leadership team, adding strong governance and risk management and delivering transparent, low-cost and straightforward investment products and solutions. In addition, Ms. Chandoha transformed the technology and operational platform to efficiently scale and grow the company and increased third-party distribution capabilities. Before joining Charles Schwab Investment Management, Inc., Ms. Chandoha was the Global Head of the Fixed Income Division of BlackRock, Inc. where she focused on commercialization, innovation and new product development. Ms. Chandoha’s more than 35 years of experience as a leader in the financial services industry and her record transforming businesses provides the Board with valuable expertise as State Street continues its technological innovation to continue meeting industry and client expectations. Ms. Chandoha is a trustee of the California chapter of the Nature Conservancy and previously served as member of the Board of Governors and Executive Committee of the Investment Company Institute. She received a B.A. degree in economics from Harvard University.

 

 

 

LOGO

 

PATRICK DE SAINT-AIGNAN

Age 71, Director Since 2009

 

Board Roles and Committees

 

•   Examining and Audit Committee

 

•   Executive Committee

 

•   Risk Committee (Chair)

 

  

 

Career Highlights

 

•   Retired Managing Director and Advisory Director, Morgan Stanley, an NYSE-listed global financial services company (1974 to 2007); firm-wide head of the company’s risk management function (1995 to 2002)

 

•   Director, Edaris Health, Inc., a private healthcare information technology company (2007 to present) (2007 to 2016 as Forerun, prior to name change to Edaris Health, Inc. in 2016); member of the Compensation Committee

 

•   Member of Supervisory Board, BH PHARMA, a private generic drug development company (2015 to present)

 

•   Former Director, Allied World Assurance Company Holdings AG, a former NYSE-listed specialty insurance and reinsurance company acquired by Fairfax Financial Holdings in 2017 (2008 to 2017); member of the Enterprise Risk Committee (Chairman), Compensation Committee, Audit Committee and Investment Committee

 

•   Former Director, Bank of China Limited (2006 to 2008); member of the Audit Committee (Chairman), the Risk Policy Committee and the Personnel and Remuneration Committee

 

Qualifications and Attributes

 

Mr. de Saint-Aignan’s extensive experience in risk management, corporate finance, capital markets and firm management brings to the Board a sophisticated understanding of risk, particularly with respect to the implementation of risk and monitoring programs within a global financial services organization. Mr. de Saint-Aignan’s service on the board of directors and committees of several other companies gives him additional perspective on global management and governance. A dual citizen of the United States and France, he was honored with Risk Magazine’s Lifetime Achievement Award in 2004. Mr. de Saint-Aignan holds his B.B.A. degree from the Ecole des Hautes Etudes Commerciales and an M.B.A. from Harvard University.

 

 

  

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    2020 NOTICE OF MEETING AND PROXY STATEMENT  

 

LOGO

 

LYNN A. DUGLE

Age 60, Director Since 2015

 

Board Roles and Committees

 

•   Examining and Audit Committee

 

•   Executive Committee

 

•   Technology and Operations Committee (Chair)

 

  

 

Career Highlights

 

•   Retired Chief Executive Officer and Chairman, Engility Holdings, Inc., an NYSE-listed engineering and technology consulting company (2018 to 2019); Chief Executive Officer and Director (2016 to 2018); Director (2014 to 2018) (2014 to 2015 as TASC, prior to acquisition by Engility Holdings, Inc.; 2015 to 2018 as Engility Holdings, Inc., prior to acquisition by Science Applications International Corp. in 2019)

 

•   Director KBR, Inc., an NYSE-listed engineering, procurement, and construction company (February 2020 to present); member of Audit Committee

 

•   Director TE Connectivity Ltd., an NYSE-listed and Swiss-domiciled technology company (March 2020 to present); member of Audit Committee

 

•   Former Corporate Vice President and President, Intelligence, Information and Services, Raytheon Company, an NYSE-listed defense contractor and electronics manufacturer (2004 to 2015); Vice President, Engineering, Technology and Quality, Network Centric Systems (2004 to 2009); Vice President, Support Engineering and Six Sigma (1997 to 1999)

 

•   Former Vice President, Product, Systems Software Division, ADC Telecommunications, Inc., a former Nasdaq-listed communications company acquired in 2010 by Tyco Electronics (2002 to 2004); General Manager, Cable Systems Division (1999 to 2002)

 

•   Former Vice President, Quality & Support Engineering, Texas Instruments, Inc., a Nasdaq-listed electronics manufacturer (1982 to 1997)

 

Qualifications and Attributes

 

As the former Chief Executive Officer and Chairman of Engility Holdings, a leading provider of integrated solutions and services for the U.S. government, Department of Defense, federal civilian agencies and international customers, Ms. Dugle brings to the Board valuable experience in leading the development of large businesses with a focus on information, technology and security matters. Her understanding of information and technology matters provides the Board with perspective as State Street continues to transform and digitize products and services. Prior to her role at Engility, Ms. Dugle was the president of Intelligence, Information and Services at Raytheon where she was responsible for the company’s advanced cyber solutions, cyber security services and information-based solutions. She also served as vice president of engineering, technology and quality for the former Network Centric Systems business at Raytheon and was responsible for the strategic direction, leadership and operations of the engineering, technology and quality functions. Prior to Raytheon, Ms. Dugle held executive positions at ADC Telecommunications with responsibility for leading teams across Europe, Middle East and Africa and the Asia-Pacific region. She holds B.S. and B.B.A. degrees from Purdue University and an M.B.A. with a concentration in international business from the University of Texas at Dallas.

 

 

  

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LOGO

 

AMELIA C. FAWCETT

Age 63, Director Since 2006

 

Board Roles and Committees

 

Lead Director

 

•   Executive Committee

 

•   Human Resources Committee

 

  

 

Career Highlights

 

•   Chairman, Kinnevik AB, a Nasdaq Stockholm-listed long-term oriented investment company (2018 to present); Deputy Chairman (2013 to 2018); Non-Executive Director (2011 to present); member of Remuneration Committee (Chair) and Governance, Risk and Compliance Committee (Chair)

 

•   Chairman, Standards Board for Alternative Investments (2011 to present) (2011 to 2017 as Hedge Fund Standards Board; 2017 to present as Standards Board for Alternative Investments) (U.K.), a global standard-setting body for the alternative investment industry

 

•   Former Non-Executive Director, HM Treasury, the British Government’s Economic & Finance Ministry (2012 to 2018)

 

•   Former Non-Executive Director, Millicom International Cellular S.A., an international telecommunications and media company (2014 to 2016); member of the Remuneration Committee (Chair) and Compliance and Business Practices Committee

 

•   Former Non-Executive Chairman, Guardian Media Group plc, a privately held diversified multimedia business in London (2009 to 2013); Non-Executive Director (2007 to 2013)

 

•   Former Vice Chairman and Chief Operating Officer of European Operations, Morgan Stanley, an NYSE-listed global financial services company (2002 to 2006) and Morgan Stanley International Limited, London (2006 to 2007); Senior Adviser (2006 to 2007); Managing Director and Chief Administrative Officer for European Operations (1996 to 2002); Executive Director (1992 to 1996); Vice President (1990 to 1992)

 

Qualifications and Attributes

 

Dame Amelia Fawcett, a dual American and British citizen, has many years of extensive and diverse financial services experience. At Morgan Stanley, she served in many roles including Vice Chairman and Chief Operating Officer of Morgan Stanley International and had responsibility for development and implementation of the company’s business strategy (including business integration), as well as oversight of the company’s operational risk functions, infrastructure support and corporate affairs. Prior to joining Morgan Stanley, she was an attorney at the New York-based law firm of Sullivan & Cromwell, practicing primarily in the areas of corporate and banking law in both New York and Paris. Her service on both the Court of Directors of the Bank of England (the Board of the British Central Bank) and the British Treasury provided her with valuable experience with the complex regulatory and compliance frameworks of the financial industry, both in the U.K. and internationally. Dame Amelia was awarded a CBE (Commander of the Order of the British Empire) and a DBE (Dame Commander of the Order of the British Empire) by the Queen, in both instances for services to the finance industry and in 2018 the Queen made her a Commander of the Royal Victorian Order for services as Chairman of The Prince of Wales’s Charitable Foundation. In addition, in 2004, she received His Royal Highness The Prince of Wales’s Ambassador Award recognizing responsible business activities that have a positive impact on society and the environment. Dame Amelia’s public policy experience and experience in the European banking markets provide a valuable international financial markets perspective to State Street. She formerly has served, or currently serves, in the capacity as governor of the Wellcome Trust, chairman of the Royal Botanic Gardens (Kew) (current), chairman of The Prince of Wales’s Charitable Foundation, deputy chairman and governor of the London Business School, a commissioner of the U.S.-U.K. Fulbright Commission, deputy chairman of the National Portrait Gallery, chairman of the American Friends of the National Portrait Gallery and a trustee of Project Hope (current). Dame Amelia received a B.A. degree from Wellesley College and a J.D. degree from the University of Virginia.

 

 

  

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    2020 NOTICE OF MEETING AND PROXY STATEMENT  

 

LOGO

 

WILLIAM C. FREDA

Age 67, Director Since 2014

 

Board Roles and Committees

 

•   Examining and Audit Committee (Chair)

 

•   Executive Committee

 

•   Risk Committee

 

  

 

Career Highlights

 

•   Retired Senior Partner and Vice Chairman, Deloitte, LLP, a global professional services firm (2011 to 2014); Managing Partner of Client Initiatives (2007 to 2011); member of U.S. Executive Committee

 

•   Chairman, Hamilton Insurance Group, a global insurance and reinsurance company (2014 to present); Director (2014 to 2017); Chairman (2017 to present)

 

•   Director, Guardian Life Insurance Company, a mutual life insurance company (2014 to present)

 

•   Former Director, Deloitte Touche Tohmatsu Limited (2007 to 2013); member of Risk Committee (Chairman) (2011 to 2013) and Audit Committee (Chairman) (2008 to 2011)

 

Qualifications and Attributes

 

As senior partner and vice chairman of Deloitte, LLP, Mr. Freda served Deloitte’s most significant clients and maintained key relationships, acting as a strategic liaison to the marketplace as well as to professional and community organizations. Mr. Freda joined Deloitte in 1974 and built a distinguished record of service during his 40-year career, having served on a wide range of multinational engagements for many of Deloitte’s largest and most strategic clients. Mr. Freda brings to the Board key insight and perspective on risk management, international expansion and client relationships gained through his extensive experience interacting with audit committees, boards of directors and senior management. He serves as a trustee of Bentley University. Previously, Mr. Freda has served as the chairman of Catholic Community Services, the United Way of Essex and West Hudson and the AICPA Insurance Companies Committee and was a U.S. Representative to the International Accounting Standards Committee’s Insurance Steering Committee. Mr. Freda received a B.S. in accounting from Bentley University.

 

 

 

 

LOGO

 

SARA MATHEW

Age 64, Director Since 2018

 

Board Roles and Committees

 

•   Nominating and Corporate Governance Committee

 

•   Risk Committee

 

  

 

Career Highlights

 

•   Retired Chairman and Chief Executive Officer, Dun & Bradstreet Corporation, an NYSE-listed international commercial data and analytics provider (2010 to 2013); President and Chief Operating Officer (2007 to 2009); Chief Financial Officer (2001 to 2007)

 

•   Non-Executive Chairman, Federal Home Loan Mortgage Company, a government-sponsored firm operating in the secondary residential mortgage market (2019 to present); Director (2013 to present); member of Audit Committee (Chair), Executive Committee and Nominating and Governance Committee

 

•   Director, Reckitt Benckiser Group plc, an FTSE-listed Health and hygiene company (2019 to present); member of Audit Committee

 

•   Former Director, Campbell Soup Company, an NYSE-listed consumer food producer (2005 to 2019); member of Audit Committee (Chair) and Finance and Corporate Development Committee

 

•   Former Director, Shire Plc, a Nasdaq-listed FTSE 25 biopharmaceutical company (2015 to 2019; prior to acquisition by Takeda Pharmaceutical Company Limited in 2019); Chair of Audit and Risk Committee and member of Compliance and Nomination and Governance Committee

 

•   Former Director, Avon Products, Inc., an NYSE-listed beauty, household and personal care products manufacturer (2014 to 2016)

 

•   Former Vice President of Finance, ASEAN, Australasia and India, Procter and Gamble Company, an NYSE-listed international manufacturer of consumer goods (2000 to 2001); Controller and Chief Financial Officer, Baby-Care and Paper Products (1998 to 2000); other various positions through her 18-year tenure

 

Qualifications and Attributes

 

In her prior role as chairman and chief executive officer of Dun & Bradstreet Corporation, Ms. Mathew led the company’s transformation from a data collection business into an innovative provider of data analytics and insights. Prior to her role as chairman and chief executive officer, she served as president and chief operating officer, overseeing the company’s consumer segments, and chief financial officer where she initiated and managed the redesign of the company’s accounting processes and controls. Before joining Dun & Bradstreet Corporation, Ms. Mathew held various positions at Procter and Gamble Company within finance, accounting, investor relations and brand management. Her deep background in finance, technology, corporate strategy and operations, combined with her experiences leading and overseeing a diverse assortment of international consumer-focused companies and transformational initiatives, allows Ms. Mathew to provide a unique, innovative and global perspective to State Street. Ms. Mathew received a B.S. degree in physics, mathematics and chemistry from the University of Madras, India and an M.B.A. degree in finance and marketing from Xavier University.

 

  

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    2020 NOTICE OF MEETING AND PROXY STATEMENT  

 

LOGO

 

WILLIAM L. MEANEY

Age 59, Director Since 2018

 

Board Roles and Committees

 

•   Human Resources Committee

 

•   Technology and Operations Committee

 

  

 

Career Highlights

 

•   President, Chief Executive Officer and Director, Iron Mountain, Inc., an NYSE-listed information management and data backup and recovery company (2013 to present)

 

•   Former Director, Qantas Airways, an Australian Securities Exchange-listed airline (2012 to 2018); member of the Safety, Health, Environment and Security Committee and the Remuneration Committee

 

•   Former Chief Executive Officer, Zuellig Group, a privately owned long-term holding company based in Hong Kong (2004 to 2012)

 

Qualifications and Attributes

 

Mr. Meaney, a citizen of the United States, Switzerland and Ireland, has extensive domestic and international business experience across both established and emerging markets. As the president and chief executive officer of Iron Mountain, he has continued to lead the company as it evolves and expands its secure storage and digital transformation offerings. Before joining Iron Mountain, Mr. Meaney was the chief executive officer of Zuellig Group, where he was responsible for a diverse portfolio of Asia Pacific businesses that spanned a variety of heavily regulated and consumer-based industries, including health care, agriculture, pharmaceuticals and materials handling. He has held several senior positions throughout the airline industry, including chief commercial officer of Swiss International Airlines and executive vice president of South African Airways, founded and managed his own consulting firm and served as an operations officer with the U.S. Central Intelligence Agency. Mr. Meaney provides State Street’s Board with an acute global viewpoint on corporate strategy and business expansion founded upon his background in leading and developing large U.S. and international companies. Mr. Meaney is a member of both the FM Global advisory board and President’s Council of Massachusetts General Hospital and is a former trustee of Rensselaer Polytechnic Institute and Carnegie Mellon University. He holds a B.S. degree from Rensselaer Polytechnic Institute and an M.B.A. from Carnegie Mellon University.

 

 

 

 

LOGO

 

RONALD P. O’HANLEY

Age 63, Director Since 2019

 

Board Roles and Committees

 

Chairman of the Board

 

•   Executive Committee (Chair)

 

•   Risk Committee

 

•   Technology and Operations Committee

  

 

Career Highlights

 

•   State Street Corporation, Chairman (2020 to present); President and Chief Executive Officer (2019 to present); President and Chief Operating Officer (2017 to 2019); Vice Chairman (2017); Chief Executive Officer and President, State Street Global Advisors (2015 to 2017)

 

•   Director, Unum Group, an NYSE-listed provider of financial protection benefits in the United States and United Kingdom (2015 to present); member of the Human Capital Committee and Governance Committee

 

•   Former President of Asset Management & Corporate Services, Fidelity Investments, Inc., a multinational financial services corporation (2010 to 2014)

 

•   Former Chief Executive Officer and President, BNY Mellon Asset Management (2007 to 2010)

 

Qualifications and Attributes

 

Mr. O’Hanley joined State Street in 2015 to lead State Street’s investment management business as the Chief Executive Officer and President of State Street Global Advisors. Since that time, he has held several senior leadership positions within the Company, serving as Vice Chairman from January 2017 to November 2017 and President and Chief Operating Officer from November 2017 to February 2019. Effective January 1, 2019, Mr. O’Hanley began his service as Chief Executive Officer and as a member of the Board of Directors and effective January 1, 2020, he was appointed Chairman of the Board. His extensive leadership, executive management and operational experience over the last three decades in asset management and global financial services provides the Board with the experience necessary to help navigate the Company’s strategic priorities on data management, client experience and technology enhancement. Mr. O’Hanley received a B.A. degree from Syracuse University and an M.B.A. from Harvard Business School.

 

  

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    2020 NOTICE OF MEETING AND PROXY STATEMENT  

 

LOGO

 

SEAN O’SULLIVAN

Age 64, Director Since 2017

 

Board Roles and Committees

 

•   Risk Committee

 

•   Technology and Operations Committee

 

  

 

Career Highlights

 

•   Retired Group Managing Director and Group Chief Operating Officer, HSBC Holdings, plc., an NYSE-listed banking and financial services organization (2011 to 2014); Executive Director and Chief Technology and Services Officer, HSBC Bank plc. (2007 to 2010); other various positions throughout his 34-year tenure

 

Qualifications and Attributes

 

As the Group Managing Director and Group Chief Operating Officer of HSBC Holdings, plc., Mr. O’Sullivan led the bank’s global operations and information technology functions, with worldwide responsibilities for business transformation, organizational restructuring and operational effectiveness. Prior to assuming the role of Group Managing Director and Group Chief Operating Officer, Mr. O’Sullivan held various positions throughout HSBC in the U.S., Canada and Europe. His long tenure at HSBC provided him with valuable experience with the operational and technology challenges faced by a large, global financial institution as well as the management of overall company effectiveness and efficiency, including development of a global approach to expense management and operational risk management. Mr. O’Sullivan is a member of the Information Technology Advisory Committee at the University of British Columbia and a former trustee of the York University Foundation. He is a dual citizen of Canada and the U.K. and received a B.A. degree from the Ivey School of Business at Western University.

 

 

 

LOGO

 

RICHARD P. SERGEL

Age 70, Director Since 1999

 

Board Roles and Committees

 

•   Examining and Audit Committee

 

•   Executive Committee

 

•   Human Resources Committee (Chair)

 

•   Nominating and Corporate Governance Committee

 

  

Career Highlights

 

•   Retired President and Chief Executive Officer, North American Electric Reliability Corporation (NERC), a self-regulatory organization for the bulk electricity system in North America (2005 to 2009)

 

•   Director, Emera, Inc., a Toronto Stock Exchange-listed energy and services company (2010 to present)

 

•   Former President and Chief Executive Officer, New England Electric System (and its successor company, National Grid USA), an NYSE-listed electric utility (1998 to 2004)

 

Qualifications and Attributes

 

Mr. Sergel’s responsibilities as chief executive officer of the North American Electric Reliability Corporation included imposing statutory responsibility and regulating the industry through adoption and enforcement of standards and practices. To do so, he led NERC to establish the first set of legally enforceable standards for the U.S. bulk power system. Prior to joining NERC, he spent 25 years with the New England Electric System, where he oversaw the merger with National Grid in 2000. His extensive practical and technical expertise in navigating the energy market through regulatory change and major transactions offers the Board important perspective on the evolving financial services industry and regulatory environment. Mr. Sergel served in the United States Air Force reserve from 1973 to 1979 and has served as a director of Jobs for Massachusetts and the Greater Boston Chamber of Commerce. He is a former trustee of the Merrimack Valley United Way and the Worcester Art Museum, prior chairman of the Consortium for Energy Efficiency and was a member of the Audit Committee for the Town of Wellesley, Massachusetts. Mr. Sergel received a B.S. degree from Florida State University, an M.S. from North Carolina State University and an M.B.A. from the University of Miami.

 

 

  

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    2020 NOTICE OF MEETING AND PROXY STATEMENT  

 

LOGO

 

GREGORY L. SUMME

Age 63, Director Since 2001

 

Board Roles and Committees

 

•   Executive Committee

 

•   Human Resources Committee

 

•   Nominating and Corporate Governance Committee (Chair)

 

  

 

Career Highlights

 

•   Managing Partner and Founder, Glen Capital Partners, LLC, an alternative asset investment fund (2013 to present)

 

•   Former Managing Director and Vice Chairman of Global Buyout, Carlyle Group, a Nasdaq-listed global asset manager (2009 to 2014)

 

•   Former Chairman, Chief Executive Officer and President, PerkinElmer, Inc., an NYSE-listed developer and producer of life science equipment and services (1998-2009)

 

•   Director, NXP Semiconductors, a Nasdaq-listed semiconductor manufacturer (2010 to present) (Director, 2010 to 2015 and Chairman, 2013 to 2015 as Freescale Semiconductor, Inc., prior to its acquisition by NXP Semiconductors in 2015; 2015 to present as NXP Semiconductors)

 

•   Former Director, LMI Aerospace, a Nasdaq-listed designer and provider of aerospace structures (2014 to 2017)

 

Qualifications and Attributes

 

Mr. Summe has extensive management experience leading large and complex corporate organizations in evolving environments. While vice chairman of Carlyle Group, he was responsible for buyout funds in financial services, infrastructure, Japan, the Middle East and African markets and served on the firm’s operating and investment committees. His experience in private equity has afforded him a deepened exposure to understanding varied business models, practices, strategies and environments and assessing value in varied international regions. During his tenure as chairman and chief executive officer at PerkinElmer, Mr. Summe led the company’s transformation from a diversified defense contractor to a technology leader in health sciences. Prior to joining PerkinElmer, Mr. Summe held leadership positions at AlliedSignal (now Honeywell), General Electric and McKinsey & Co. Mr. Summe holds B.S. and M.S. degrees in electrical engineering from the University of Kentucky and the University of Cincinnati, respectively, and an M.B.A. with distinction from the Wharton School of the University of Pennsylvania. He is also in the Engineering Hall of Distinction at the University of Kentucky.

 

 

 

DIRECTOR NOT STANDING FOR REELECTION AT THE 2020 ANNUAL MEETING

Kennett F. Burnes’ service as a director will end at the 2020 annual meeting of shareholders and the Board thanks him for his service. Mr. Burnes currently serves on the Human Resources Committee, Nominating and Corporate Governance Committee and Technology and Operations Committee. He has been a member of the Board since 2003 and preceded Amelia Fawcett as the independent Lead Director.

 

  

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Executive Compensation

Compensation Discussion and Analysis

In this compensation discussion and analysis, or CD&A, we describe our approach to executive compensation, including our philosophy, design and process and the alignment of our incentive compensation with our risk management principles. We also describe compensation decisions for 2019 for the following named executive officers, or NEOs:

 

 

Ronald P. O’Hanley — President and Chief Executive Officer

 

 

Eric W. Aboaf — Executive Vice President and Chief Financial Officer

 

 

Francisco Aristeguieta — Executive Vice President and Chief Executive Officer for International Business

 

 

Jeffrey N. Carp — Executive Vice President, Chief Legal Officer and Secretary

 

 

Andrew J. Erickson — Executive Vice President and Head of Global Services

In this CD&A, references to the Committee are references to the Human Resources Committee of the Board.

 

 

CD&A Table of Contents      Page

Executive Summary

     25

Compensation Philosophy

     28

New Compensation Program Features for the 2019 Compensation Year

     28

Compensation Vehicles and Design

     30

2019 Compensation Decisions

     31

Prior Year Performance-Based RSU Awards

     40

Other Elements of Compensation

     40

Other Elements of Our Process

     43

Human Resources Committee Process Concerning Risk Alignment

     45

Executive Equity Ownership Guidelines, Practices and Policies

     45

 

  

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Executive Summary

To better align pay outcomes with both individual and corporate performance results for the year, including providing a more direct link to annual corporate results, the Committee approved a new compensation structure as described under the heading “New Compensation Program Features for the 2019 Compensation Year.” The payout under the 2019 program is determined based on individual performance (60% of the incentive award target) and corporate performance (40% of the incentive award target).

Corporate Performance Summary

2019 began with significant challenges, including financial market weakness, falling interest rates and increased client fee pricing pressure, and our revenue, pre-tax margin, diluted earnings per share (EPS) and return on average common equity (ROE) all decreased in 2019 from 2018. In the face of these headwinds, we acted aggressively to stabilize revenues and reduce expenses and made progress on key business objectives. Actions included:

 

 

strengthening our value proposition to clients, including the ongoing build-out of our front-to-back State Street Alpha platform

 

 

successfully executing a firm-wide expense savings program that exceeded initial targets and resulted in approximately $415 million in gross expense savings during 2019

 

 

reorganized the leadership of our multi-regional international business under a single executive to further our growth objectives

Due to these actions and the steady recovery of U.S. average market levels in 2019, our financial results in the second half of the year improved relative to the first half of the year. Total revenue for the second half of the year increased by approximately 3%, total fee revenue increased approximately 2% and EPS increased approximately 7%, in each case relative to the first half of the year. With regard to risk management performance, we made progress on initiatives to improve our financial risk posture, but did not achieve desired non-financial risk improvement. While we know more is required for us to advance our overall performance, we are nonetheless confident in the trajectory of our business and focused on continuing to improve our performance.

In determining our NEOs’ compensation for 2019, the Committee evaluated State Street’s overall corporate performance. Consistent with prior years, this evaluation included a structured assessment of corporate performance based on three discrete scorecards that capture State Street’s annual performance against financial, business and risk management objectives. Improvement in the second half of the year, particularly with respect to financial and business performance, tempered the disappointing start to 2019. However, the Committee concluded that State Street’s full year Overall Performance was Below Expectations as a result of financial and risk management performance against objectives. Our corporate performance is described in more detail under the heading “2019 Compensation Decisions—Corporate Performance.” The Committee’s conclusions are shown below:

 

Corporate Performance Scorecards      2019 Committee Evaluation
Financial Performance      Below Expectations
Business Performance      At Expectations
Risk Management Performance      Below Expectations
Overall Performance      Below Expectations

Corporate Performance Evaluation Outcome. Based on the Committee’s evaluation of State Street’s overall performance, the Committee applied a 62.5% factor against target for the corporate component of the 2019 incentive awards made to all executive officers, as described below.

NEO Performance Summary

In determining our NEOs’ compensation for 2019, the Committee also evaluated each NEO’s individual performance, including assessments of:

 

 

financial, business and risk management objectives derived from the corporate scorecards

 

 

leadership and talent-related performance, including a focus on diversity and inclusion and employee engagement and development



 

  

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While overall corporate performance for 2019 was Below Expectations, State Street’s management team took a number of actions that delivered strong results in the second half of 2019, reversing unsatisfactory revenue trends and exceeding expense management goals. The Committee’s review of each NEO’s individual performance is discussed in more detail in the discussion under “2019 Compensation Decisions—Individual Performance and Compensation Decisions” below.

NEO Incentive Compensation Decisions

For 2019, the Committee awarded our NEOs total incentive awards ranging from 83% to 97% of target, reflecting both our performance as a company as well as each NEO’s individual performance, as described in more detail under the heading “2019 Compensation Decisions—Individual Performance and Compensation Decisions.”

Given Mr. O’Hanley’s responsibility as Chief Executive Officer for overall company performance, the Committee’s decision on his compensation was primarily driven by its evaluation of overall company results, and he received a total incentive award of 83% of target. This decision resulted in equity- and cash-based incentive elements below target, as presented in the chart below:

 

LOGO

NEO Incentive Compensation Mix(1)

Incentive awards are delivered through four award vehicles, as described in the “Compensation Vehicles and Design” table below. The incentive compensation mix emphasizes deferral and performance-based equity. 90% of incentive awards for our NEOs are deferred. In addition, 67% of our CEO’s and 62% of our other NEOs’ equity awards are performance-based restricted stock units, referred to as performance-based RSUs. This structure is designed to drive financial performance and to align incentives with the performance experienced by our shareholders. For 2019, incentive awards were delivered in: performance-based RSUs; deferred stock awards, referred to as DSAs; deferred value awards (deferred cash), referred to as DVAs; and immediate cash, as shown below:

 

LOGO

 

LOGO

 

(1)

Does not include Mr. Aristeguieta. In connection with his offer of employment, State Street agreed to provide Mr. Aristeguieta with 2019 incentive compensation via a pay mix consisting of: 40% performance-based RSUs; 25% DSAs; 20% DVAs; and 15% cash.



 

  

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Sound Compensation and Corporate Governance Practices

Our NEO compensation practices are designed to support good governance and mitigate against excessive risk-taking. We regularly review and refine our governance practices considering several factors, including feedback from ongoing engagement with our shareholders.

 

 

 

LOGO

 

What We Do

  
 

•   Long-term performance-based equity awards in the form of performance-based RSUs

 

•   Significant deferred equity- and cash-based incentive compensation

 

•   Active engagement with shareholders on compensation and governance issues

 

•   Close interaction between the Human Resources Committee and our Risk Committee and Examining and Audit Committee

 

•   Independent compensation consultant

 

  

•   Clawback and forfeiture provisions to permit recoupment of incentive compensation

 

•   “Double-trigger” change-of-control required for deferred incentive compensation acceleration and cash payments

 

•   Stock ownership policy, including holding requirements for NEOs who are below full ownership guidelines

 

•   Non-compete and other restrictive covenants

 

•   Annual review of incentive compensation design for alignment with risk management principles

 

 

 

LOGO

  

What We Do Not Do

  
  

•   No change-of-control excise tax gross-up

 

•   No “single-trigger” change-of-control vesting or cash payments

 

•   No option repricing

 

  

•   No short-selling, options trading, hedging or speculative transactions in State Street securities

 

•   No tax gross-ups on perquisites(1)

 

•   No multi-year guaranteed incentive awards

 

 

(1)

Excluding certain international assignment and relocation benefits.

Shareholder Outreach and “Say-on-Pay”

In reviewing compensation design and governance practices, the Committee considers market trends and regulatory guidance, as well as other factors, including shareholder feedback. The Committee receives feedback from our shareholders through two primary channels:

 

 

Shareholder Outreach. We engage with our largest shareholders to understand their perspectives on our compensation and governance programs. For 2019, we engaged or requested engagement with shareholders representing more than half of our outstanding common stock

 

 

“Say-on-Pay.” At our annual shareholder meeting, we ask our shareholders to approve a non-binding advisory proposal on executive compensation. At our 2019 annual meeting, our shareholders approved the proposal with over 90% of the votes cast

Based on discussions with our shareholders and the results of our “say-on-pay” vote, the Committee believes that our shareholders support our overall executive compensation program. For the 2019 compensation year, we therefore continued many of the elements of our existing compensation program, such as maintaining a high level of performance-based equity and deferral for incentive compensation awards to our NEOs. One area of specific discussion we had with several of our shareholders in recent years involved the clarity and transparency of the relationship between individual pay outcomes and company performance. For example, several shareholders requested additional detail on the relationship between scorecard-based evaluations of corporate performance and individual pay decisions. These discussions, together with long-term strategic and other considerations, informed the changes to the structure of our compensation program for 2019, described under “New Compensation Program Features for the 2019 Compensation Year,” below.



 

  

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Compensation Philosophy

State Street’s compensation program for NEOs and other executive officers aims to:

 

 

attract, retain and motivate superior executives and drive strong leadership behaviors

 

 

reward those executives for meeting or exceeding individual and company financial and business objectives

 

 

drive long-term shareholder value and financial stability

 

 

align incentive compensation with the performance results experienced by our shareholders through the use of significant levels of deferred equity-based compensation

 

 

provide equal pay for work of equal value

 

 

achieve the preceding goals in a manner aligned with sound risk management and our corporate values

New Compensation Program Features for the 2019 Compensation Year

To better align pay outcomes with both corporate and individual performance results for the year, the Committee approved a new compensation structure. The changes from the pre-2019 compensation program along with the associated rationale are outlined below:

 

LOGO

Comparison of Pre-2019 Compensation Program vs. 2019 Compensation Program for NEOs Pre-2019 Compensation Program 2019 Compensation Program Incentive Compensation Targets and Delivery Vehicles Separate annual and long-term incentive targets established for each executive officer Annual incentive award varied within a range of 0 - 200% of target and was delivered through immediate cash and DVAs Long-term incentive award varied within a range of 80 - 120% of target and was delivered through performance-based RSUs and DSAs A single total incentive target established for each executive officer Incentive award may vary within a range of 0-200% of target and is delivered through the same four vehicles used previously and described below To determine final incentive value, target is split into individual performance and corporate performance components Determining Individual Compensation Awards Annual incentive award driven by enterprise- and individual-level scorecard-based evaluations of financial, strategic and risk management performance Long-term incentive award driven by State Street's long term performance trend and the core responsibilities associated with the NEO's role overtime, including leadership and talent-related performance Determining Individual Compensation Awards Individual performance component driven by individual-level scorecard-based evaluations of individual financial, strategic, risk and leadership and talent-related performance Corporate performance component driven by enterprise-level scorecard-based evaluations of financial, strategic and risk management performance Individual and corporate performance component values are summed and delivered through established incentive award mix Rationale for Changes Separate individual and corporate performance components provide clearer accountability for individual and corporate results Pay structure results in a wider range of possible pay outcomes and more closely links equity-based awards to current year performance Individual performance component increases individual accountability for current year outcomes and results in greater pay variability The same factor is applied to the corporate performance component for all executive officers, providing a more transparent link to annual corporate results and promoting shared accountability

 

  

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Accordingly, the Committee used the following framework to determine 2019 compensation year awards for the NEOs:

 

LOGO

Preliminary Incentive Compensation (1C) Recommendation Consideration of Other Factors Outcome & Delivery Individual Component (Individual Performance = 60% of Total 1C Tarqet) Corporate Component (Corporate Performance = 40% of Total 1C Taraet) Based on performance against individual objectives: Financial Business Risk Excellence Leadership & Talent Based on Corporate Performance scorecards: Financial Business Risk Excellence Committee and Other Directors' Evaluation of the NEOs Market compensation levels, trends, and practices Relative Performance vs. Peer Companies(1) Final CEO 1C delivered in: 10% Immediate Cash 15% Deferred Value Awards 25% Deferred Stock Awards 50% Performance-based RSUs (represents 67% of equity delivered) Final Other NEO IC delivered in(2): 10% Immediate Cash 25% Deferred Value Awards 25% Deferred Stock Awards 40% Performance-based RSUs (represents 62% of equity delivered)

 

(1)

Our 15-company compensation peer group is described below under the heading, “Other Elements of Our Process—Peer Group and Benchmarking.”

(2)

In connection with his offer of employment, State Street agreed to provide Mr. Aristeguieta with 2019 incentive compensation via a pay mix consisting of: 40% performance-based RSUs; 25% DSAs; 20% DVAs; and 15% cash.

 

  

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Compensation Vehicles and Design

Compensation Design. Total compensation for 2019 was delivered via base salary and incentive compensation. Incentive compensation for 2019 was delivered through the following vehicles:

 

Vehicle    Vehicle Description    Considerations and Rationale

Equity-Based Incentive Compensation

(75% of incentive compensation for CEO; 65% for Other NEOs)

Performance-

Based Restricted

Stock Units

(RSUs)

  

•   Number of performance-based RSUs ultimately earned based on State Street’s average annual ROE and pre-tax margin over the three-year performance period (2020 – 2022)

 

•   ROE and pre-tax margin weighted equally in determining the performance-based RSU payout, resulting in a total payout range of 0 – 150%, shown in the table below

 

 

  

•   Equity-based compensation directly aligns the rewards and risks shared by our NEOs and our shareholders

 

•   Performance-based RSUs are aligned with our long-term performance and financial goals

 

•   Performance-based RSUs granted for 2019 and 2018 performance included pre-tax margin as a second metric in equal weight with ROE, further aligning NEO compensation with our business strategy

LOGO

50% Weighting 50% Weighting ROE ROE Performance Pre-tax Margin Pre-tax Margin Performance Total Payout Range < 8% No Payout + < 24% No Payout 8.0% Threshold + 24.0% Threshold 13.0% Target + 29.0% Target > 18.0% Maximum + >34.0% Maximum = 0 - 150% Total Payout

    

•   Performance-based RSUs ultimately earned “cliff” vest in one installment in February 2023

 

•   Paid in State Street shares upon vesting

    

Deferred Stock

Awards (DSAs)

  

•   DSAs vest ratably in four equal annual installments (with the first installment vesting in February 2021)

 

•   Paid in State Street shares upon vesting

  

•   Subject to vesting requirements

 

•   Equity-based compensation directly aligns the rewards and risks shared by our NEOs and our shareholders

Cash-Based Incentive Compensation

(25% of incentive compensation for CEO; 35% for Other NEOs)

Deferred Value

Awards (DVAs)

  

•   DVAs are notionally invested in a money market fund

 

•   Vest ratably in 16 quarterly installments (with the first installment vesting in May 2020)

 

•   Paid in cash upon vesting

  

•   Subject to vesting requirements

Immediate Cash

(non-deferred)

  

•   Immediate cash award

  

•   Provides a limited immediate incentive

 

  

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Recourse Provisions. All incentive compensation awards for our NEOs are subject to clawback and forfeiture provisions. For more information, see the discussion under “Other Elements of Compensation—Adjustment and Recourse Mechanisms” below.

Restrictive Covenants. Each of the deferred incentive compensation awards granted to our NEOs in 2019 includes restrictive covenants concerning non-competition and non-solicitation.

2019 Compensation Decisions

Total Compensation Approach

The Committee evaluates individual compensation for our NEOs and other executive officers by looking at total direct compensation, consisting of base salary and incentive compensation. The Committee evaluates base salary and incentive compensation levels at least annually.

Base Salary. Base salary is a relatively small portion of total compensation for the NEOs. None of the NEOs received a base salary increase in 2019.

Setting Individual Incentive Compensation Targets. The Committee establishes incentive compensation targets for our NEOs each year. The targets are based on each executive’s role and responsibilities, performance trend, competitive and market factors and internal equity.

For 2019, each NEO’s target total compensation was allocated as follows:

 

Name   

Base

Salary Rate

   Total Target Incentive
Compensation
     Target Total
Compensation

Ronald P. O’Hanley

     $ 800,000      $ 13,200,000        $ 14,000,000

Eric W. Aboaf

       700,000        5,800,000          6,500,000

Francisco Aristeguieta(1)

       704,000        6,800,000          7,504,000

Jeffrey N. Carp

       650,000        5,500,000          6,150,000

Andrew J. Erickson

       500,480        6,009,600          6,510,080

 

(1)

In connection with his offer of employment, State Street agreed to provide Mr. Aristeguieta with compensation designed to maintain his 2019 compensation near his expected level of compensation at his prior employer.

Determining Incentive Compensation Awards. Following the end of the performance year, the Committee evaluates the individual and corporate component values for each NEO in light of input from the CEO (on the other NEOs) as well as other directors, market compensation levels, trends and practices and corporate financial performance relative to peers to reach final total incentive award amounts, as described above under “New Compensation Program Features for the 2019 Compensation Year”. In evaluating performance, the Committee may consider additional factors or give greater or less weight to any factor.

Once the final incentive compensation amount has been determined, the total incentive value is delivered through the established mix of performance-based RSUs, DSAs, DVAs and immediate cash vehicles described in the “Compensation Vehicles and Design” table above.

Corporate Performance

Framework Evaluation. The corporate performance framework uses a structured evaluation of three discrete, multi-factor scorecards, which contain both quantitative and qualitative metrics, and cover:

 

 

financial performance

 

 

business performance

 

 

risk management performance

 

  

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The Committee considered the financial, business and risk management performance scorecards in July and December 2019, as well as final 2019 scorecards in early 2020. The full Board of Directors also reviews financial performance at each Board meeting. The Committee’s overall evaluation of corporate performance, balancing positive and negative performance outcomes in each of these scorecards, is a primary driver of incentive compensation decisions for our Chief Executive Officer and for the corporate performance incentive factor for our other NEOs.

Under the 2019 compensation program, all executive officers receive the same corporate performance factor for the 40% of their total target incentive that is based on the Committee’s evaluation of overall corporate performance. Improvement in the second half of the year, particularly with respect to financial and business performance, tempered the disappointing start to 2019. However, the Committee concluded that State Street’s full year performance was Below Expectations as a result of financial and risk management performance against objectives. Consequently, all executive officers received only 62.5% of the corporate performance component of their incentive compensation target, impacting both equity- and cash-based incentive compensation awards. A description of each of the three corporate performance scorecards, including second half trend evaluations, is found below.

Financial Performance. During its evaluation of 2019 performance, the Committee had access to financial results presented in conformity with GAAP, as well as financial results presented on a basis that excludes or adjusts one or more items from GAAP. This latter basis is a non-GAAP presentation. In general, our non-GAAP financial results adjust selected GAAP-basis financial results to exclude the impact of revenue and expenses outside of State Street’s normal course of business or other notable items. Management believes that this presentation of financial information facilitates an investor’s and the Committee’s further understanding and analysis of State Street’s financial performance and trends with respect to State Street’s business operations from period-to-period, including providing additional insight into our underlying margin and profitability. Financial results are presented on a non-GAAP basis in this section, unless otherwise noted. Non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, financial measures determined in conformity with GAAP. For a reconciliation of non-GAAP measures presented in this CD&A, see Appendix C.

2019 began with significant challenges, including financial market weakness, falling interest rates and increased client fee pricing pressure, and our revenue, pre-tax margin, EPS and ROE all decreased in 2019 from 2018. In the face of these headwinds, we acted aggressively to stabilize revenues and reduce expenses. Actions included strengthening our value proposition to clients, including the ongoing build-out of our front-to-back State Street Alpha platform, and the successful execution of a firm-wide expense savings program that exceeded initial targets and resulted in approximately $415 million in gross expense savings during 2019.

Due to these actions and the steady recovery of U.S. average market levels in 2019, our financial results in the second half of the year improved relative to the first half of the year.

 

  

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Financial Performance

 

     

Performance Scorecard

 

 

2019 Performance Highlights

 

 

  

2019 Committee Evaluation

 

 

Key Areas Reviewed:

 

 

Consolidated Financial Performance (excluding notable items,
non-GAAP
(1))

 

           

 

Full Year Evaluation:

Below Expectations

• Revenue

 

($ in millions, except per share data)

 

    

 

2019

 

 

 

    

 

    2018

 

 

 

    

 

    Change

 

 

 

  

• Expenses

 

Total fee revenue

     $9,147          $9,462          (3.3)%       

Second Half Trend:

 

• Pre-tax Margin

 

Total revenue

     11,712          12,139          (3.5)%        At Expectations

• EPS

 

Expenses

     8,675          8,625          0.6%       

• ROE

 

Pre-tax margin

     25.8%          28.8%          (300) bps       

• Structural Expense Savings

 

EPS

     6.17          7.21          (14.4)%       
 

ROE

     10.8%          13.7%          (290) bps       
                  
 

($ in millions, except per share data)

 

    

 

2H 2019

 

 

 

    

 

1H 2019

 

 

 

    

 

Change

 

 

 

  
 

Total fee revenue

     $4,627          $4,520          2.4%       
 

Total revenue

     5,907          5,805          1.8%       
 

Expenses

     4,263          4,412          (3.4)%       
 

Pre-tax margin

     27.7%          23.9%          380 bps       
 

EPS

     3.48          2.69          29.4%       
 

ROE

     11.9%          9.7%          220 bps       
             
    
 

Total Shareholder Return (TSR):

    
State
Street
 
 
    
Peer  Group
Median(2)
 
 
    

S&P

Financial

Index

 

 

 

  
 

1-Year TSR

     29.3%          31.8%          32.1%       
 

3-Year TSR

     9.2%          24.8%          40.4%       

Additional Financial Performance Detail

(excluding notable items, non-GAAP(1))

 

Full Year 2019

 

    Revenue declined approximately 3% from 2018, reflecting the elevated level of industry servicing fee pricing pressure, which began to moderate for us in the second half of 2019  

 

    Expenses were well managed in 2019, up slightly from 2018 reflecting our acquisition of Charles River Development, which closed on October 1, 2018. We achieved approximately $415 million in structural/ gross expense savings in 2019, exceeding our initial goal of $350 million  

 

    2019 pre-tax margin, EPS and ROE declined from 2018  

 

    We returned a total of $2.3 billion to our shareholders during 2019 in the form of common stock dividends and share repurchases  

 

    2019 revenue growth, EPS and ROE were in the bottom quartile relative to our peer group on a GAAP basis. Our one-year TSR improved from (34.0%) in 2018 to 29.3% in 2019, but was slightly below our peer group median  

 

1H to 2H 2019

 

    Total revenue and fee revenue both increased approximately 2% and servicing fees increased approximately 3% in the second half of 2019 relative to the first half of 2019  

 

    Expenses decreased from the first half of 2019 by approximately 3% for the second half of 2019 as the company executed on its expense savings plan  

 

    Pre-tax margin increased from the first half of 2019 by 380 bps to 27.7% for the second half of 2019  

 

    EPS increased from the first half of 2019 by $0.79 in the second half of 2019  

 

    ROE increased from the first half of 2019 by 220 bps to 11.9% for the second half of 2019  

 

    We increased our quarterly dividend 11% to $0.52 per share for each of the third and fourth quarters of 2019  
 

 

(1)

Financial results are presented on a non-GAAP basis in this section, unless otherwise noted. Non-GAAP financial results adjust selected GAAP-basis financial results to exclude the impact of notable items outside of State Street’s normal course of business. Non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, financial measures determined in conformity with GAAP. For a reconciliation of non-GAAP measures presented in this CD&A, see Appendix C.

(2)

Our 15-company compensation peer group is described below under the heading, “Other Elements of Our Process—Peer Group and Benchmarking.”

 

 

 

  

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Business Performance

 

     
Performance Scorecard    2019 Performance Highlights    2019 Committee Evaluation

Key Goals:

•   Be an essential partner—trusted, strategic and proactive

 

•   Develop a scalable, configurable end-to-end operating model that sets the industry standard

 

•   Establish initial version of our front-to-back platform

 

•   Establish leadership in our key products

 

•   Be a global destination for talent and become a high performing organization

  

•   Took key actions to drive our strategic and operational objectives, including:

–   rolling out State Street Alpha, the industry’s first front-to-back platform from a single provider;

 

–   re-engineering asset servicing design in support of our planned end-to-end operating model;

 

–   completing our senior executive client coverage model for our largest clients; and

 

–   implementing a new pricing committee that has brought a firm-wide view to client relationships, profitability and new revenue opportunities

 

•   Aligned our operating model by combining Operations, Technology and Delivery teams to strengthen business and operational connectivity

 

•   Initiated a systematic transformation of State Street with a goal of improving client, employee and shareholder experience

 

•   Broadened the composition of the company’s Management Committee, our most senior strategy and policy-making team, resulting in a more globally-focused and diverse body

 

•   Reorganized the leadership of our multi-regional international business under a single executive to further our growth objectives

  

Full Year Evaluation:

At Expectations

 

Second Half Trend:

Consistent with Full Year Evaluation

Risk Management Performance

 

     
Performance Scorecard    2019 Performance Highlights    2019 Committee Evaluation

Key Areas Reviewed:

 

•   Financial and non-financial risks

 

•   Progress against risk and compliance commitments and risk mitigation programs

 

•   Process improvements in higher risk areas or activities

  

•   Did not achieve desired non-financial risk improvement

 

•   Demonstrated positive trends in financial risk performance, including across measures of the Company’s credit, asset liability management, liquidity and capital adequacy activities

 

•   Experienced higher operational loss rates relative to the last two years due to increased re-investment in enterprise change programs

 

•   Completed the Federal Reserve’s 2019 CCAR process, without the Federal Reserve objecting to our 2019 capital plan

  

Full Year Evaluation:

Below Expectations

 

Second Half Trend:

Consistent with Full Year Evaluation

State Street’s 2019 performance is reviewed in greater detail, along with relevant risks associated with our business, results of operations and financial condition, in our 2019 annual report on Form 10-K, which accompanies this proxy statement and was previously filed with the SEC.

 

  

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  Executive Compensation

 

    2020 NOTICE OF MEETING AND PROXY STATEMENT  

 

Individual Performance and Compensation Decisions

In evaluating each NEO’s individual performance, the Committee reviewed performance scorecards derived from our corporate performance goals and tailored to each NEO in the following areas: financial; business; risk management; and leadership and talent. Performance highlights and the Committee’s incentive compensation and total compensation decisions for 2019 for the NEOs are presented in the summaries below. For detail on the relationship between the 2019 amounts reported in the summaries below and those amounts reported in the Summary Compensation Table (as required by SEC rules) and related tables, please refer to the discussion under “2019 Compensation Decisions—Individual Compensation Decisions” below.

 

Ronald P. O’Hanley, President and Chief Executive Officer

   

2019 Performance Highlights

Financial   Business   Risk Excellence   Leadership & Talent

 

•   Took swift actions to address financial headwinds

 

–   Stabilized servicing fee revenues

 

–   Announced approximately $1.8 trillion in new servicing business wins

 

–   Announced a State Street record level of assets under management reflecting higher market levels and net inflows of approximately $100 billion

 

•   Revenue declined from 2018, reflecting the elevated level of industry servicing fee pricing pressure; pre-tax margin, EPS and ROE each declined from 2018

 

•   Actively managed expenses, driven by new resource discipline, process reengineering and automation efforts. Exceeded initial target of $350 million in gross expense savings, finishing the year at approximately $415 million

 

•   Executed against our strategic and operational objectives

 

–   Launched State Street Alpha, the industry’s first front-to-back platform from a single provider; signed first four Alpha clients

 

–   Re-engineered asset servicing design to support our planned end-to-end operating model

 

–   Completed our senior executive client coverage model for our largest clients

 

•   Combined Operations, Technology and Delivery teams to strengthen business and operational connectivity

 

•   Initiated a systematic transformation of State Street with a goal of improving client, employee and shareholder experience

 

•   Improved transparency and accountability across senior leadership team to strengthen risk excellence in key focus areas

 

•   Completed CCAR 2019, allowing for a capital return of approximately 116% of earnings(1), and executed an additional capital action, in addition to our original CCAR plan, with a redemption of $750M of preferred equity

 

•   Enhanced Anti-Money Laundering program, Liquidity Risk, Model Risk Management and Recovery and Resolution Planning

 

•   Demonstrated positive trends in financial risk performance

 

•   Did not achieve desired non-financial risk improvement

 

•   Experienced higher operational loss rates relative to the last two years as re-investment through enterprise change programs has increased

 

•   Completed transition into Chief Executive Officer position

 

•   Reorganized the leadership of our multi-regional international business under a single executive to further our growth objectives

 

•   Broadened Management Committee to drive global strategies and improve diversity

 

•   Improved company-wide performance management processes with a focus on improving employee engagement and recognition

 

•   Identified and articulated cultural traits and behaviors required to achieve strategic objectives

 

Compensation for 2019

  

Mr. O’Hanley received total compensation of $11,800,000 for 2019. This compensation is an increase from his total compensation for 2018, which reflected his prior role of President and Chief Operating Officer. The individual component of his incentive was 97% of target reflecting both overall corporate results as well as his leadership on actions taken in light of the significant challenges described earlier. State Street’s corporate component was 62.5% of target for all executive officers. These components resulted in Mr. O’Hanley receiving total incentive compensation of $11,000,000 for 2019, representing 83% of target.

  

 

LOGO

 

 

 

(1)

Capital return represents total common stock dividends and common stock purchases of $2,331 million during 2019 as a percentage of net income available to common shareholders for the year ended December 31, 2019 of $2,009 million.

 

  

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Eric W. Aboaf, Chief Financial Officer

2019 Performance Highlights

  

Compensation for 2019

As Chief Financial Officer, Mr. Aboaf responded to challenges in the revenue environment with strong leadership and execution

 

•   Revenue declined from 2018, reflecting the elevated level of industry servicing fee pricing pressure; pre-tax margin, EPS and ROE each declined from 2018

 

•   Enhanced net interest income performance with additional deposit gathering initiatives

 

•   Actively managed expenses, driven by new resource discipline, process reengineering and automation efforts. Exceeded initial target of $350 million in gross expense savings, finishing the year at approximately $415 million

 

•   Implemented process improvements in financial reporting to drive increased internal transparency and accountability

 

•   Completed CCAR 2019, allowing for a capital return of approximately 116% of earnings(1), and executed an additional capital action, in addition to our original CCAR plan, with a redemption of $750M of preferred equity

 

•   Demonstrated positive trends in financial risk performance

 

•   Did not achieve desired non-financial risk improvement

 

•   Effectively progressed headcount management and diversity initiatives in the Finance function

 

•   Assumed responsibility for our Global Credit Finance Division, which offers a broad array of credit and liquidity products spanning various sectors to support our clients’ financing needs

  

Mr. Aboaf was awarded total compensation of $6,325,000 for 2019. The individual component of his incentive was 120% of target. State Street’s corporate component was 62.5% of target for all executive officers. These components resulted in Mr. Aboaf receiving total incentive compensation of $5,625,000 for 2019, representing 97% of target.

 

LOGO

 

(1)

Capital return represents total common stock dividends and common stock purchases of $2,331 million during 2019 as a percentage of net income available to common shareholders for the year ended December 31, 2019 of $2,009 million.

 

  

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  Executive Compensation

 

    2020 NOTICE OF MEETING AND PROXY STATEMENT  

 

Francisco Aristeguieta, Chief Executive Officer for International Business

2019 Performance Highlights

   Compensation for 2019

Mr. Aristeguieta joined State Street in July of 2019 as Chief Executive Officer for International Business and made significant progress on international strategy while establishing strong partnerships with the global leadership team

 

•   Developed a new vision, strategy and organizational design for sustainable growth, consistency and scale across the firm’s global businesses

 

•   Identified Latin America as a growth priority, developed a new strategy and enhanced resource deployment in the region

 

•   Quickly established effective relationships with senior leaders across the globe to assess current state, focusing on opportunities for improved performance and client outcomes

  

Mr. Aristeguieta received 2019 incentive compensation of $6,800,000. Including an annualized base salary, his total compensation for 2019 would have been $7,504,000, as reflected in the 2019 Total Compensation Mix chart below. This compensation, together with equity-based awards granted to Mr. Aristeguieta in July 2019 and described under “Other Elements of Compensation—Other Awards and Agreements” below, were designed to provide compensation levels consistent with his expected compensation from his prior employer.

 

 

LOGO

 

Jeffrey N. Carp, Chief Legal Officer and Secretary

  

2019 Performance Highlights

   Compensation for 2019

As Chief Legal Officer and Secretary, Mr. Carp set a high standard for proactive execution, risk excellence and executive collaboration

 

•   Strengthened and evolved our legal, regulatory and security functions globally

 

•   Effectively partnered with other senior leaders to drive targeted outcomes for risk, regulatory and business initiatives, including leading initiatives to create new capacity in risk-weighted assets and optimize capital and liquidity

 

•   Provided a balanced approach to legal matters and overall thought leadership to the executive team, including as an important advisor to the Chief Executive Officer

 

•   Through disciplined resourcing and headcount management, successfully delivered against expense management objectives for the legal, regulatory and security functions

 

•   Provided effective oversight and coordination of overall relationships with regulators

  

Mr. Carp was awarded total compensation of $5,650,000 for 2019. The individual component of his incentive was 110% of target. State Street’s corporate component was 62.5% of target for all executive officers. These components resulted in Mr. Carp receiving total incentive compensation of $5,000,000 for 2019, representing 91% of target.

 

 

LOGO

 

  

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Andrew J. Erickson, Head of Global Services

  

2019 Performance Highlights

   Compensation for 2019

As Head of Global Services, Mr. Erickson strengthened client partnerships through internal leadership and external collaboration

 

•   Took aggressive actions to stabilize and strengthen revenues

 

•   Implemented client initiatives to drive better service quality and deepen relationships

 

•   Completed our senior executive client coverage model for our largest clients

 

•   Introduced a new pricing committee that has brought a firm-wide view to client relationships, profitability and new revenue opportunities

 

•   Introduced a new client onboarding process that enabled us to scale rapidly and take on an industry-leading $1.8 trillion in new servicing wins in 2019

 

•   Successfully launched Global Clients Division, which is responsible for building strategic relationships with our largest and most complex global clients; also assumed responsibility for our Global Marketing Division

  

Mr. Erickson was awarded total compensation of $6,325,480 for 2019. The individual component of his incentive was 120% of target. State Street’s corporate component was 62.5% of target for all executive officers. These components resulted in Mr. Erickson receiving total incentive compensation of $5,825,000 for 2019, representing 97% of target.

 

LOGO

Individual Compensation Decisions. The Compensation Committee’s incentive compensation decisions for 2019 for the NEOs relative to their targets are presented in the table below.

 

      Equity-Based Incentive      Cash-Based Incentive  
Named Executive Officer    Actual      Target      Actual      Target  

Ronald P. O’Hanley

   $ 8,250,000      $ 9,900,000      $ 2,750,000      $ 3,300,000  

Eric W. Aboaf

     3,656,250        3,770,000        1,968,750        2,030,000  

Francisco Aristeguieta(1)

     4,420,000        4,420,000        2,380,000        2,380,000  

Jeffrey N. Carp

     3,250,000        3,575,000        1,750,000        1,925,000  

Andrew J. Erickson

     3,786,250        3,906,240        2,038,750        2,103,360  

 

(1)

In connection with his offer of employment, State Street agreed to provide Mr. Aristeguieta with compensation designed to maintain his 2019 compensation near his expected level of compensation at his prior employer.

 

  

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The Committee’s total compensation decisions for 2019 for the NEOs are presented in the table below. Note (1) to the table below describes the relationship between the 2019 amounts reported in the table below and those amounts reported in the Summary Compensation Table (as required by SEC rules) and related tables. While the table below summarizes how the Committee views annual compensation, it is not a substitute for the tables and disclosures required by SEC rules.

 

              Equity-Based Incentive      Cash-Based Incentive          
Named Executive Officer    Annual Base
Salary
     Performance-
Based RSUs
     DSAs      Immediate
Cash
     DVAs      Total
Compensation(1)
 

Ronald P. O’Hanley

     $800,000        $5,500,000        $2,750,000        $1,100,000        $1,650,000        $11,800,000

Eric W. Aboaf

       700,000          2,250,000          1,406,250             562,500          1,406,250            6,325,000

Francisco Aristeguieta(2)

       704,000          2,720,000          1,700,000          1,020,000          1,360,000            7,504,000

Jeffrey N. Carp

       650,000          2,000,000          1,250,000             500,000          1,250,000            5,650,000

Andrew J. Erickson

       500,480          2,330,000          1,456,250             582,500          1,456,250            6,325,480  

 

(1)

The 2019 compensation described in the table above, which summarizes how the Committee evaluates annual total compensation, differs from the compensation described in the Summary Compensation Table below in the following respects:

 

Annual Base Salary. The table above reflects the year-end annual base salary rate applicable for each NEO. Column (c) in the Summary Compensation Table presents the amount of base salary actually earned by each NEO during the relevant year.

 

DVAs. The table above, like the Summary Compensation Table, reflects the value of deferred cash compensation awarded by the Committee for the 2019 performance year. However, the table above does not reflect any dividends credited on DVAs outstanding during 2019, which are described in note (4) to the Summary Compensation Table.

 

Equity-Based Incentive Awards. The Committee grants equity awards based on the prior year’s performance. In the table above, equity awards are shown for the year of performance (i.e., equity granted in 2020 for 2019 performance is shown as 2019 compensation). Under applicable SEC rules, the Summary Compensation Table presents equity awards in the year in which they are granted (e.g., equity granted in 2019 for 2018 performance is shown as 2019 compensation).

 

Other Awards. In considering Mr. Aristeguieta’s 2019 incentive compensation, the Committee did not include the equity-based awards granted to Mr. Aristeguieta in July 2019 and described under “Other Elements of Compensation—Other Awards and Agreements.” Those awards were designed to replace deferred compensation at his former employer that Mr. Aristeguieta forfeited to join State Street and are therefore excluded from the Total Compensation column in this table. These awards consist solely of equity-based compensation, which, under applicable SEC rules, are presented in the Summary Compensation Table in the year in which the awards were granted.

 

Total Compensation. The amounts disclosed above differ from the amounts reported in column (j) of the Summary Compensation Table due to the different methodologies discussed in the notes above. Additionally, this table excludes several items required to be included in the Summary Compensation Table that State Street does not view as primary components of regular annual compensation and therefore were not considered in setting incentive targets or determining incentive awards, such as the change in pension value (which is due solely to variances in actuarial computations over time).

(2)

In connection with his offer of employment, State Street agreed to provide Mr. Aristeguieta with compensation designed to maintain his 2019 compensation near his expected level of compensation at his prior employer.

 

  

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Prior Year Performance-Based RSU Awards

Performance-based RSUs granted to our NEOs, as described above under “Compensation Vehicles and Design,” are subject to the achievement of pre-established performance metrics. Our performance-based RSUs outstanding on December 31, 2019 are summarized below:

 

Performance
Year(1)
  

Year of

Grant

   Performance
Period
   Performance Metric Target    Potential
Payout
  Payout(2)
2016    2017    2017 – 2019    Average ROE of 11% for the 2017 to 2019 performance period    0 – 140%   107.7% in February 2020 based on an average adjusted ROE of 11.77%
2017    2018    2018 – 2020    Average ROE of 13% for the 2018 to 2020 performance period    0 – 150%   Current estimated payout below target based on 2018 – 2019 average ROE; any payout to be approved by the Committee in February/ March 2021(3)
2018    2019    2019 – 2021    Average ROE of 13% and average pre-tax margin of 29% for the 2019 to 2021 performance period    0 – 150%   Current estimated payout below target based on 2019 ROE and pre-tax margin; any payout to be approved by the Committee in February/ March 2022(3)

 

(1)

For additional information about the terms of these awards, see the discussion below under “Other Elements of Compensation—Adjustment and Recourse Mechanisms,” the narrative discussion following the “2019 Grants of Plan-Based Awards” table below, the “Outstanding Equity Awards at Fiscal Year-End, December 31, 2019” table below and our prior year proxy statements.

(2)

Achievement of ROE and pre-tax margin targets for performance-based RSUs is subject to adjustment for pre-established, objectively determinable factors. For the 2016 performance year awards, the Committee approved adjustments to the three-year average ROE of 10.70% to account for changes in tax laws, acquisitions and dispositions, merger and integration expenses, restructuring expenses, securities issuances and redemption expenses and legal and regulatory matters arising from prior performance periods, resulting in a three-year average adjusted ROE of 11.77%. See Appendix C for a reconciliation of the three-year average ROE to the three-year average adjusted ROE. In addition, all awards are subject to the Committee’s ability to exercise negative discretion in determining the payout achieved, as well as recourse mechanisms described in more detail under “Other Elements of Compensation—Adjustment and Recourse Mechanisms” below.

(3)

Current estimated payouts based on estimated performance of relevant criteria only for completed fiscal years within the three-year performance period. This performance has not been certified and is therefore subject to adjustment based on the terms of the relevant awards. No estimate of performance for incomplete fiscal years within the performance period has been made. Final payout will be based on satisfaction of the performance criteria as certified by the Committee following the end of the full performance period.

Other Elements of Compensation

Other Awards and Agreements

In July 2019, Mr. Aristeguieta was hired as the Chief Executive Officer for International Business. In this role, he leads all of our international business activities including driving strategy, stewarding client engagement, developing talent, pursuing growth opportunities and maintaining regulatory relationships. Prior to joining State Street, he served as the Chief Executive Officer of Citigroup Asia where he was responsible for all businesses in the region’s 16 markets. Mr. Aristeguieta’s hire supports a key objective of our long term strategy—namely, to win in the fastest growing and highest potential markets.

In July 2019, in connection with his hiring, the Committee granted Mr. Aristeguieta equity awards totaling approximately $9.5 million, including approximately $2.35 million in performance-based RSUs, to compensate him for the loss of outstanding deferred incentive compensation from his prior employer. These awards were an important element of attracting Mr. Aristeguieta to join State Street and are described in more detail below in the “2019 Grants of Plan-Based Awards” table and the footnotes to the “Outstanding Equity Awards at Fiscal Year-End, December 31, 2019” table.

Adjustment and Recourse Mechanisms

Incentive compensation awards to our NEOs are subject to adjustment and recourse mechanisms, including ex ante adjustment, forfeiture and clawback, which may be applied jointly, or separately, as appropriate.

 

  

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Ex Ante Adjustment. Before awards are made for a given compensation year, all incentive awards for our NEOs, including deferred incentive awards and the immediate cash incentive, are subject to downward adjustment, in whole or in part, upon the occurrence of specified events. The Committee, in its discretion, determines whether this ex ante adjustment is appropriate. The events for which ex ante adjustment may occur include:

 

 

if the executive’s actions exposed State Street to inappropriate risks that resulted in a “Significantly Below Expectations” rating on any of the factors on State Street’s corporate multi-factor risk scorecard, which guides State Street’s risk assessment process, or

 

 

if the executive incurred significant or repeated compliance or risk-related violations of State Street’s policies

Forfeiture. Before vesting and delivery to the executive, all deferred incentive awards to our NEOs, including performance-based RSUs, DSAs and DVAs, allow reduction or cancellation of the award, in whole or in part, upon the occurrence of specified events. The Committee, in its discretion, determines whether forfeiture is appropriate. The events for which forfeiture may occur include:

 

 

if the executive’s actions exposed State Street to inappropriate risks, including in a supervisory capacity, that resulted or could reasonably be expected to result in material losses that are or would be substantial in relation to State Street’s or a relevant business unit’s revenue, capital and overall risk tolerance

 

 

if the executive engaged in fraud, gross negligence or any misconduct, including in a supervisory capacity, that was materially detrimental to the interests or business reputation of State Street or any of its businesses

 

 

if the executive engaged in conduct that constituted a violation of State Street policies and procedures or our Standard of Conduct in a manner which either caused or could have caused reputational harm that is material to State Street or either placed or could have placed State Street at material legal or financial risk, or

 

 

if, as a result of a material financial restatement contained in an SEC filing, or miscalculation or inaccuracy in the determination of performance metrics, financial results or other criteria used in determining the amount of the award, the executive would have received a smaller or no award

In addition, all incentive awards are forfeited if an executive’s employment is terminated by State Street for gross misconduct.

Clawback. All amounts delivered to our NEOs as incentive awards, including immediate cash incentive awards, performance-based RSUs, DSAs and DVAs, contain clawback provisions providing for the repayment of those amounts, in whole or in part, upon the occurrence of specified events. The Committee, in its discretion, determines whether clawback is appropriate, making that determination within four years (in the case of performance-based RSUs) or three years (in the case of all other incentive awards) of the award’s grant date. The events for which clawback may occur include:

 

 

if the executive engaged in fraud or willful misconduct, including in a supervisory capacity, that resulted in financial or reputational harm that is material to State Street and resulted in termination of the executive’s employment

 

 

if, as a result of the occurrence of a material financial restatement by State Street contained in a filing with the SEC or miscalculation or inaccuracy in financial results, performance metrics, or other criteria used in determining the amount of the award, the executive would have received a smaller or no award, or

 

 

if the executive failed to comply with the terms of any covenant not to compete entered into with State Street

All incentive awards are also subject to any compensation recovery or similar requirements under applicable laws, rules and regulations and related State Street policies and are interpreted and administered accordingly. This approach is intended to comply with applicable banking regulations and regulatory guidance on incentive compensation. In 2019, the Committee reviewed the terms of these recourse mechanisms in light of evolving market practices and added a clawback provision applicable to State Street’s executive officers and other senior leaders providing for the repayment of incentive compensation in the event of prohibited competition during or following employment, as noted above.

 

  

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Retirement Benefits

Our U.S.-based NEOs are eligible to participate in our 401(k) retirement plan available to our U.S.-based employees generally. The plan includes a matching employer contribution of 6% up to Internal Revenue Code limits.

Because pension benefits under our now-frozen U.S. qualified defined benefit plan were limited by Internal Revenue Code restrictions, we now maintain two frozen supplemental pension programs. One was designed to make up for lost contributions due to Internal Revenue Code limits and was frozen along with the qualified defined benefit pension plan. Mr. Carp is the only NEO who participates in this plan. The second plan was originally designed to provide Executive Vice Presidents and above with competitive retirement benefits to encourage their continued employment based upon a specified percentage of compensation. It was later changed to include two separate benefit components: (1) a traditional defined benefit component, in which only Mr. Carp participates, which was substantially frozen in 2007 with all accruals ending in 2017; and (2) a defined contribution component, which was substantially frozen in January 2017 following an executive supplemental retirement plan market analysis, and in which Messrs. Carp and Erickson hold plan balances and in which only Mr. Carp continues to receive contributions (and upon his expected retirement during 2020, no further contributions will be made to any participant under the plan). These plans are described in further detail below under the headings “2019 Pension Benefits” and “2019 Nonqualified Deferred Compensation.”

Messrs. Aristeguieta and Erickson participate in our Hong Kong defined contribution Mandatory Provident Fund (MPF) and Occupational Retirement Scheme Ordinance (ORSO), which are retirement programs available to our Hong Kong employees generally. In aggregate, the participant contributes 5% of his or her base salary and State Street contributes an amount equal to 10% of the participant’s base salary to the MPF and ORSO. Participant and State Street contributions based on the first 5% of monthly base salaries of up to 30,000 HK$ (approximately 3,800 US$) are contributed to the MPF; participant contributions based on monthly base salary earnings above that limit, and State Street contributions that exceed 5% of the participant’s monthly base salary (or 1,500 HK$ per month if the participant’s monthly base salary is more than 30,000 HK$), are contributed to the ORSO.

Deferred Compensation

We maintain a nonqualified deferred compensation plan that allows our U.S. NEOs and other senior employees to defer base salary and/or a portion of incentive awards otherwise payable in immediate cash. State Street matches all deferrals made under this plan up to a maximum of 5% of a participant’s match-eligible compensation, comprising the lesser of (i) base salary plus immediately payable annual cash incentive compensation or (ii) $500,000, in either case reduced by the applicable Internal Revenue Code cap on annual compensation ($280,000 in 2019). Participants receive a return based on one or more notional investment options selected by the participant. Currently, the investment options available to our NEOs include a money market fund, three index funds and a State Street common stock fund. The nonqualified deferred compensation plan supplements deferrals made under our tax-qualified 401(k) plan. We provide these nonqualified deferred compensation benefits because many companies of our size provide a similar benefit to their senior employees. This plan is described below under the heading “2019 Nonqualified Deferred Compensation.”

Perquisites

We provide our NEOs a modest level of perquisites, such as financial planning, annual physicals and personal liability coverage. In addition, the Board provided Mr. O’Hanley with an executive security package consisting of a car and driver and other security benefits. These security measures, along with the car and driver provided to Mr. Aristeguieta and the parking benefits provided to our other NEOs, promote the effectiveness of our senior executives, allowing them greater opportunity to focus their attention on our business operations and activities. We also provided Mr. Erickson with customary international assignment benefits related to his service in the U.S. These benefits included allowances for goods, services and housing; tax preparation and advisory services; and tax equalization payments. In connection with his offer of employment, State Street agreed to provide Mr. Aristeguieta with a car and driver and club memberships, which are customary benefits for leaders in the region. The club memberships provide a venue for hosting clients, building networks with local industry leaders and developing prospects in support of Mr. Aristeguieta’s role as Chief Executive Officer for International Business. In addition, we provided Mr. Aristeguieta international assignment benefits, which included a goods and services allowance, relocation services, tax preparation and advisory services and tax equalization payments. In limited circumstances, our NEOs have combined personal travel with business travel at no incremental cost to us. We do not provide a tax gross-up for the income attributable to any perquisite for our NEOs, other than for certain international assignment and relocation benefits.

 

  

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Change-of-Control Agreements

Under a long-standing program, we have change-of-control employment agreements in place with each of our NEOs. We provide these agreements because we believe providing some protection in the event of a change of control is necessary to attract and retain high quality executives and to help address potential distractions during the period leading up to a possible change of control. Our change-of-control arrangements are further described below under the heading “Potential Payments upon Termination or Change of Control as of December 31, 2019.”

NEO Compensation Changes for 2020

Effective at the end of the first quarter of 2020, Messrs. O’Hanley and Erickson received base salary increases to $1,000,000 and $700,000, respectively. This is the first increase to Mr. O’Hanley’s base salary since he was appointed as Chief Executive Officer on January 1, 2019. The Committee increased target total compensation for 2020 for Messrs. O’Hanley and Erickson to $14,500,000 and $7,000,000, respectively. The Committee also increased target total compensation for 2020 for Mr. Aboaf to $7,000,000. The Committee considers these base salary and target compensation increases to be appropriate based on the recent expansion of each executive’s role described in more detail under “2019 Compensation Decisions—Individual Performance and Compensation Decisions,” as well as relevant internal and external benchmarks.

Other Elements of Our Process

Roles of the Committee and the Chief Executive Officer

The Committee has direct responsibility for our executive officer compensation plans, policies and programs. The Committee performs these responsibilities for the Chief Executive Officer in consultation with the other independent directors. In making compensation decisions for the other NEOs, the Committee considers the recommendations of our Chief Executive Officer, as well as input from the other independent directors.

After establishing each NEO’s total compensation target for 2019, the Committee met nine times from July 2019 through March 2020 regarding 2019 NEO compensation and related topics and evaluated a broad range of corporate performance factors, individual performance updates, market information, regulatory updates and input from our shareholder engagement efforts, as well as its pay-for-performance practices and the results of our annual shareholder meeting, including “say-on-pay” results. The Committee also considered evolving trends, practices, guidance and requirements in the design, regulation, risk-alignment and governance of compensation matters in the U.S. and other jurisdictions. During these meetings, the Committee received regular updates, including from the Committee’s independent compensation consultant, on these and other matters, particularly with respect to the financial services industry.

Peer Group and Benchmarking

The Committee reviews market data from our peer group as one factor evaluated in determining executive compensation. The Committee also considers peer group data in structuring the design of its executive compensation programs.

We consider few companies to be true comparators for the specific scope of our primary business activities, so we include in our peer group our direct competitors and other companies with which we compete in some aspects of our businesses and for executive talent. The companies also vary in size and the nature of applicable regulation, including status (like State Street) as a systemically important financial institution. The Committee, with the assistance of its independent compensation consultant, periodically reviews the composition of our peer group to ensure it continues to serve as an appropriate market reference for executive compensation purposes. Our generally applicable peer group, periodically reviewed and approved by the Committee, consists of the following 15 firms:

 

  

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Ameriprise Financial, Inc.

 

 

 

 

Franklin Resources, Inc.

 

 

 

 

Northern Trust Corporation

       

The Bank of New York Mellon Corporation

 

    

 

The Goldman Sachs Group, Inc.

 

    

 

The PNC Financial Services Group, Inc.

       

BlackRock, Inc.

 

 

 

 

Intercontinental Exchange, Inc.

 

 

 

 

Prudential Financial, Inc.

       

Capital One Financial Corporation

 

 

 

 

Invesco Ltd.

 

 

 

 

S&P Global Inc.

       

The Charles Schwab Corporation

 

 

 

 

JPMorgan Chase & Co.

 

 

 

 

U.S. Bancorp

During 2019, the Committee reviewed peer group compensation data from public sources, supplemented with data from multiple compensation surveys. This survey data generally covered large financial services companies with whom we may compete for executive talent. In evaluating the market data, the Committee considers total compensation to consist of base salary and incentive compensation. In addition to the market data, the Committee received regular updates during 2019 and the first quarter of 2020 regarding market trends and compensation actions at major financial services institutions.

The Committee recognized that the peer group companies vary in size and business lines and that the nature of executive roles varies by company. Therefore, the Committee did not treat peer group data as definitive when determining executive compensation for 2019. Rather, it referenced peer group compensation data and performance data, but formed its own perspective on compensation for our NEOs based on its subjective evaluation of many factors, including those described under the heading “2019 Compensation Decisions—Total Compensation Approach.”

Compensation Consultant

The Committee directly retains Meridian Compensation Partners to provide independent compensation consulting to the Committee. Meridian regularly participated in meetings and executive sessions of the Committee. Meridian did not provide any other services to State Street during 2019.

The Committee believes the consultant’s primary representatives advising the Committee should be independent of management and the Committee for the consultant to provide appropriate advice on compensation matters. Therefore, the Committee adopted a policy requiring an annual assessment of compensation consultant independence based on the requirements of the NYSE. In December 2019, the Committee reviewed the independence of Meridian and its primary representatives under the policy. Following its review, the Committee determined the primary representatives of Meridian to be independent and that no conflicts of interest were raised by the services of Meridian or its primary representatives.

The Committee reviews data prepared by Willis Towers Watson PLC and McLagan Partners as part of its consideration of compensation matters. Each of these companies, engaged by our Global Human Resources group based on its specialized expertise in the financial services industry, has provided other services to State Street in the past and may do so in the future.

Tax Deductibility of Executive Compensation

Section 162(m) of the U.S. Internal Revenue Code generally limits to $1 million the U.S. federal income tax deductibility of compensation paid to certain executive officers. The Committee believes that shareholder interests are best served by not restricting its discretion and flexibility in structuring compensation programs, even though such programs will result in non-deductible compensation expenses. Therefore, the Committee has approved compensation for 2019 for our NEOs that will not be fully deductible.

 

  

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Human Resources Committee Process Concerning Risk Alignment

For 2019, we continued our focus on aligning incentive compensation with appropriate risk management principles. We provide incentives that are designed not to encourage unnecessary or excessive risk-taking and have established related process controls and oversight. These features include:

 

 

Human Resources Committee Interaction and Overlap with Examining and Audit Committee. Members of the Committee regularly communicate with the Board’s Risk Committee and its Examining and Audit Committee to integrate input from these other committees into compensation decisions. In addition, the current Chair of the Human Resources Committee also serves on the Examining and Audit Committee.

 

 

Corporate Risk Summary Review. The Human Resources Committee periodically reviews a corporate multi-factor risk scorecard, prepared by the Chief Risk Officer and confirmed by the Risk Committee, assessing firm-wide risk in several categories.

 

 

Annual Compensation Risk Review. The Committee annually meets with our Chief Human Resources Officer, Chief Risk Officer and Chief Compliance Officer to evaluate our compensation programs and review an assessment of the design and operation of State Street’s incentive compensation system in providing risk-taking incentives that are consistent with the organization’s safety and soundness, as described in more detail below under the heading “Alignment of Incentive Compensation and Risk.”

 

 

Risk-Based Adjustments to Incentive Compensation. We use a two-pronged process for risk-based adjustments to incentive compensation awards for material risk-takers. This process allows for, as appropriate, both: (1) adjustments at the time awards are made (“ex ante” adjustments) and (2) adjustments after the awards are made (“ex post” adjustments) through recoupment of incentive compensation that has already been awarded via forfeiture (before vesting and delivery) or clawback (after vesting and delivery). For more information, see the discussion under “Other Elements of Compensation—Adjustment and Recourse Mechanisms,” above.

 

 

Emphasis on Deferral and Equity-Based Compensation. We maintain significant levels of deferred compensation and equity-based compensation for our executives and we continue to deliver a higher percentage of our NEOs’ incentive compensation in the form of deferred compensation relative to our peer group. Combined, these elements align an executive’s compensation with the risks and performance results experienced by our shareholders. The high level of deferral places a significant amount of compensation at risk for ex post adjustments in specified circumstances.

 

 

Metrics and Targets for Performance-Based RSUs Aligned to Long-Term Goals. We deliver a substantial proportion of equity compensation for our executives in performance-based RSUs, aligning realized pay outcomes with our long-term strategy. Metrics used in our performance-based RSUs directly align NEO compensation with our goals. Each year, we assess target and payout ranges for new awards and set targets that the Committee believes are challenging, but achievable, which mitigates excessive risk-taking incentives. In setting targets and payout ranges, the Committee considers publicly-stated guidance and projections, current-year results and peer company financial results, among other factors.

For a further discussion of the risk alignment of our compensation practices, see below under the heading “Alignment of Incentive Compensation and Risk.”

Executive Equity Ownership Guidelines, Practices and Policies

State Street believes executive stock ownership aligns our executives’ interests with those of our shareholders. It also incentivizes our executives to meet our financial, business and risk management objectives. Therefore, we maintain the following practices, policies and guidelines:

Stock Ownership Guidelines. Our stock ownership guidelines apply to all members of our Management Committee, including our NEOs. These guidelines require executives to own shares of common stock with a value equal to a multiple of base salary as shown below. Guideline levels are phased in over a period of five years, with the first year starting on the first January 1 after the person is appointed to the Management Committee. The executive is expected to attain the ownership level ratably over five years and is deemed to satisfy the guideline if that ratable ownership level is met.

 

  

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Our Stock Ownership Guidelines also include a holding requirement. Under this requirement, during the five-year phase-in period, each executive must hold 50% of the number of net shares received from a vesting event if the ownership requirement is not met. Following the five year phase-in period, if the ownership guideline is not met by an executive, that executive must hold 100% of the number of net shares received from a vesting event until the ownership guideline is satisfied. As of March 2, 2020, the holding requirement does not apply to any of the NEOs as each exceeds their full (not ratable) ownership guideline.

 

Name    Common Stock Ownership
Guideline Multiple of
Annual Base Salary
   Executive Exceeds
Ownership
Guideline

Ronald P. O’Hanley

   7   

Eric W. Aboaf

   5   

Francisco Aristeguieta

   5   

Jeffrey N. Carp

   5   

Andrew J. Erickson

   5   

The level of ownership was calculated on March 2, 2020, the same date used for the “Security Ownership of Certain Beneficial Owners and Management Table” below, and by reference to the closing price of our common stock on the NYSE on that date. Ownership includes shares directly owned, DSAs and earned performance-based RSUs (all on an after-tax basis), shares held under our 401(k) retirement plan, vested shares in other State Street retirement plans and certain indirectly held shares, but excludes unearned performance-based RSUs. This calculation differs from the calculation of shares under applicable SEC rules for purposes of the Security Ownership of Certain Beneficial Owners and Management Table.

As noted in the table above, each NEO currently exceeds their ownership guideline.

Securities Trading Policy; No Hedging or Speculative Trading; Rule 10b5-1 Plans. State Street has a Securities Trading Policy that contains specific provisions and trading restrictions. The policy assists our directors, executive officers and other designated employees with access to sensitive information in complying with U.S. federal securities laws when trading in State Street securities. The policy prohibits short selling State Street securities, engaging in hedging transactions in State Street securities and engaging in speculative trading in State Street securities by directors, executive officers, and other designated employees, as well as by other members of their household and their dependent family members, and certain accounts or entities over which the person has a control or a beneficial interest. The policy permits individuals, including our NEOs, to enter into trading plans designed to comply with Rule 10b5-1 under the Securities Exchange Act of 1934. Rule 10b5-1 allows executives to prearrange sales of their company’s securities in a manner designed to avoid initiating stock transactions while in possession of material non-public information. Our NEOs and other executive officers may, from time to time, adopt trading plans under Rule 10b5-1 and effect transactions in our securities under those plans. The Securities Trading Policy is in addition to the requirement in our Standard of Conduct that all employees’ trading activities must be in compliance with applicable law and may not be made on the basis of material non-public information. In addition, the Standard of Conduct prohibits all employees from engaging in options, hedging, or short sales involving securities issued by State Street, and provides that anything beyond simple purchases or sales of State Street stock is strictly prohibited.

Equity Grant Guidelines. The Committee’s Equity Grant Guidelines are described below:

 

 

Annual Equity Award Grants. Annual grants of equity awards to our employees are typically made by the Committee on the date of a scheduled meeting of the Committee or the Board of Directors to be held in February or March of each year following the public release of financial results for the prior fiscal year. Pursuant to authority delegated by the Board, and subject to any limitations that the Board or the Committee may establish, another committee of the Board (which may consist of a single member) may make annual grants to persons other than executive officers on the date of the scheduled meeting in February or March.

 

 

Other Equity Award Grants. Grants of equity awards to NEOs and other executive officers in connection with new hires, promotions, special recognition, retention or other special circumstances are made by the Committee. Awards to other individuals may be made either by the Committee or, subject to any limitations that the Board or the Committee may establish, a committee of the Board

 

  

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composed of (1) the Chairman of the Board, (2) the Chief Executive Officer, if a member of the Board, (3) the Committee Chair or (4) the Committee Chair along with any other member of the Committee. This type of award may be granted on the date of a scheduled meeting of the Committee, a scheduled meeting of the Board or the last business day of a calendar month.

 

 

The exercise price for all stock options and stock appreciation rights will be the NYSE closing price of State Street’s common stock on the date of grant.

Except for the setting of the February 2020 meeting to occur after our public release of 2020 annual earnings, there was no program, plan or practice of timing equity awards in coordination with the release of material non-public information.

 

  

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Other Executive Compensation Information

Human Resources Committee Report

The Committee furnishes the following report:

The Committee has reviewed and discussed the Compensation Discussion and Analysis with State Street management. Based on this review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

Submitted by,

Richard P. Sergel, Chair

Kennett F. Burnes

Amelia C. Fawcett

    

William L. Meaney

Gregory L. Summe

CEO Pay Ratio Disclosure

This section provides an estimate under applicable SEC regulations of the ratio of total compensation for our Chief Executive Officer to the median of total compensation for our other employees. The methodology and the material assumptions, adjustments and estimates we used in identifying our median employee and calculating that employee’s total compensation are set forth below. This methodology may differ from that applied by other companies, including other financial services companies, under applicable SEC regulations. As a result, the information may not be comparable to similar information disclosed by other companies. In addition, because the value of health and welfare benefits paid by State Street can vary significantly, depending on the employee’s annual benefits elections, we decided to exclude the value of these benefits from the total compensation of the median employee and Mr. O’Hanley. Accordingly, the methodology differs from the methodology we used for 2018, which included health and welfare benefits.

For 2019:

 

 

the estimated median of the annual total compensation of all employees of State Street (other than Mr. O’Hanley), was $56,610; and

 

 

the annual total compensation of Mr. O’Hanley was $8,699,401

Based on the foregoing, the ratio of the annual total compensation of Mr. O’Hanley to the median of the annual total compensation of all other employees is estimated to be 154 to 1.

We identified our median employee for 2019 based on our employee population as of December 1, 2019. State Street employees are generally eligible for base pay and incentive compensation. We therefore analyzed our employee population based on these compensation elements for full year 2019. We annualized the base pay of all full and part-time employees in our employee population who were hired during 2019. Similarly, for all such employees who did not receive incentive compensation in 2019 due solely to their date of hire, we used a consistent methodology to impute annualized incentive compensation based on each employee’s level and function. We calculated the median gross pay (as described above) and selected the twelve closest employees to that value to further analyze. We then identified an employee from this group, who was reasonably representative of our workforce and whose pay was a reasonable estimate of the median pay at our organization, as the median employee. For the median employee, we combined all forms of compensation that would have been reported in the “Total” column (column (j)) of the Summary Compensation Table had disclosure of the median employee’s compensation been required in that table.

For Mr. O’Hanley, we used the amount reported in the “Total” column (column (j)) of our Summary Compensation Table.

Alignment of Incentive Compensation and Risk

We align incentive compensation with appropriate risk management principles, such as providing incentives designed not to encourage unnecessary or excessive risk-taking and establishing additional process controls and oversight where appropriate. We utilize broad and integrated processes to maintain this alignment, including to:

 

 

conduct risk-based reviews of incentive plan design

 

 

identify individuals whose normal activities may involve material risk-taking

 

 

apply risk-based adjustments to compensation

 

 

implement specific Board committee review of selected control function compensation (e.g., Board-level Risk Committee review of Chief Risk Officer and Enterprise Risk Management department compensation)

 

  

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LOGO       

  

 

Risk-Based Review of Incentive Plan Design

 

• Incentive compensation arrangements are designed through consultation with the relevant business units, including a formalized requirement for risk review

 

• A management committee (the Incentive Compensation Control Committee, or ICCC) comprising generally of senior representatives of our risk management and internal control functions assesses all incentive compensation arrangements to promote their consistency with the safety and soundness of State Street and with applicable regulations and guidance

 

• Both the Human Resources Committee and a management committee focusing on compliance and ethics (the Compliance and Ethics Committee) receive and review a report containing the ICCC’s risk assessment of the design and operation of State Street’s incentive compensation system in providing incentives consistent with the organization’s safety and soundness

 

• The Human Resources Committee interacts closely with our Risk Committee and Examining and Audit Committee, and our independent Lead Director is expected to attend all Committee meetings, providing governance continuity from both a compensation-risk perspective and also from a broader risk management perspective. The Human Resources Committee also annually meets with our Chief Human Resources Officer, Chief Risk Officer and Chief Compliance Officer to evaluate the incentive compensation plans for all State Street employees, including the NEOs, relative to risk management principles

 

 

 

LOGO       

  

 

Identification of Material Risk-Takers

 

• Through a process led by our Enterprise Risk Management group, we identify the population of individuals whose normal activities may involve material risk-taking (“material risk-takers”)

 

• Our internal compensation arrangements with these employees provide for risk-based adjustments to compensation if required, as described below

 

 

LOGO       

  

 

Risk-Based Adjustments to Compensation for Material Risk Takers

 

• Incentive compensation awarded to material risk-takers is subject to risk-based adjustments both before and after the compensation is awarded (ex ante and ex post adjustments, respectively)

 

• Ex ante adjustments are guided by a corporate multi-factor risk scorecard, prepared by the Chief Risk Officer and confirmed by the Risk Committee, assessing firm-wide risk in several categories

 

• Ex post adjustments include a forfeiture provision, which operates to reduce or cancel the amount remaining to be paid under the relevant award if the Committee determines that the actions of the material risk-taker exposed State Street to inappropriate risks that resulted or could reasonably be expected to result in material losses that are or would be substantial in relation to State Street’s or a relevant business unit’s revenue, capital and overall risk tolerance

 

• Additional ex post adjustment mechanisms, including our misconduct and financial restatement-related forfeiture and clawback provisions, are applicable to all Executive Vice Presidents, including our NEOs. See above under the heading “Other Elements of Compensation—Adjustment and Recourse Mechanisms”

 

 

  

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LOGO       

  

 

Risk-Based Adjustments to Compensation for All Employees

 

• Results of business unit- and corporate function-level risk assessments are used as an input to allocate bonus pools to each business unit and corporate function, as well as for further sub-allocations

 

• Poor risk performance, including significant or repeated compliance or risk-related violations of State Street’s policies, may result in ex ante adjustments to an individual’s incentive compensation as part of a progressive discipline structure to hold individual employees accountable for their performance

 

• All outstanding performance-based RSUs, DSAs and DVAs are subject to forfeiture if an employee is terminated for gross misconduct

 

 

LOGO       

  

 

Board Committee Review of Selected Control Function Compensation

 

• Committees of the Board of Directors with oversight of an area managed by specific control functions assess the performance of, and individual compensation recommendations for, the heads of the relevant control function and review the compensation for the entire control function

 

• Results of the Board-level committee assessments are reported to the Human Resources Committee as an input into final compensation determinations

 

• This process provides the relevant committee with additional perspective on the performance of the relevant control function and whether that function is being allocated appropriate resources and compensation

 

As a result of these reviews and processes, we believe that our compensation policies and practices for employees do not promote excessive risk taking and do not provide incentives to create risks that are reasonably likely to have a material adverse effect on us.

 

  

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Summary Compensation Table

 

Name and Principal Position   Year   Salary(1)
($)
    Bonus(2)
($)
   

Stock

Awards(3)
($)

    Non-Equity
Incentive Plan
Compensation(4)
($)
   

Change in
Pension  Value
and
Nonqualified
Deferred
Compensation
Earnings(5)

($)

    All Other
Compensation(1)(6)
($)
   

Total

($)

 
(a)   (b)   (c)     (d)     (e)     (g)     (h)     (i)     (j)  

Ronald P. O’Hanley

President and Chief Executive Officer

  2019   $ 800,000     $     $ 4,926,560     $ 2,837,004     $     $ 135,837     $ 8,699,401  
  2018     800,000             5,034,952       2,378,391             123,322       8,336,665  
  2017     800,000             5,299,912       4,068,768             79,215       10,247,895  

Eric W. Aboaf

Executive Vice President and Chief

Financial Officer

  2019     700,000             2,584,015       2,010,066             82,925       5,377,006  
  2018     700,000             5,099,903       1,585,609             52,711       7,438,223  
  2017     700,000       892,500       1,657,398       2,648,207             237,246       6,135,351  

Francisco Aristeguieta

Executive Vice President and Chief

Executive Officer for International Business

 

  2019     325,505             9,511,387       2,380,000             1,135,364       13,352,256  
               
                                                           

Jeffrey N. Carp

Executive Vice President, Chief Legal

Officer and Secretary

  2019     650,000             2,580,012       1,810,265       1,205,255       245,747       6,491,279  
               
                                                           

Andrew J. Erickson

Executive Vice President and Head of Global Services

  2019     500,480             2,283,584       2,070,122             1,312,673       6,166,859  
  2018     487,040             1,999,976       1,111,299             1,616,081       5,214,396  
  2017     436,253             5,430,042       1,538,168             1,022,205       8,426,668  

 

(1)

Mr. Aristeguieta’s 2019 salary reflects the pro-rated portion of his annual salary of $704,000 from commencement of his employment in July 2019 through December 31, 2019. Salaries and compensation included in the “All Other Compensation” column for Mr. Aristeguieta and Mr. Erickson were converted from HK$ to US$ using an exchange rate of 0.128 for 2019 and 2018, and 0.128359 for Mr. Erickson in 2017.

(2)

Reflects a 2017 cash payment made in connection with Mr. Aboaf’s commencement of employment with State Street to compensate him for the loss of incentive compensation from his prior employer.

(3)

Amounts represent the grant date fair value of DSA and performance-based RSUs. The fair value of each award is computed in accordance with GAAP (FASB ASC 718), using the assumptions stated in note 18 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2019. The amounts included for the 2019 performance-based RSUs reflect target level performance, as reflected in the 2019 Grants of Plan-Based Awards table. Based on the grant date value and assuming that performance results in the maximum number of shares vesting, each NEO’s 2019 performance-based RSUs would have a maximum payout as follows: Mr. O’Hanley – 66,666 shares and value of $4,433,956; Mr. Aboaf – 34,967 shares and value of $2,325,655; Mr. Aristeguieta – 67,017 shares and value of $3,527,105; Mr. Carp – 32,205 shares and value of $2,141,955; and Mr. Erickson – 30,902 shares and value of $2,055,292. Based on the grant date value and assuming that performance results in the maximum number of shares vesting, the 2018 performance-based RSUs would have a maximum payout as follows: Mr. O’Hanley – 44,751 shares and value of $4,531,272; Mr. Aboaf – 57,179 shares and value of $5,789,672; and Mr. Erickson –17,777 shares and value of $1,800,099. Based on the grant date value and assuming that performance results in the maximum number of shares vesting, the 2017 performance-based RSUs would have a maximum payout as follows: Mr. O’Hanley – 60,137 shares and value of $4,451,942; Mr. Aboaf – 18,807 shares and value of $1,392,282; and Mr. Erickson – 83,371 shares and value of $7,201,288.

 

  

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(4)

Represents the immediate and deferred cash (granted in DVAs) portions of incentive compensation, as well as dividends credited on DVAs outstanding during 2019, as shown in the table below. DVAs are units that receive a notional investment return of a money market instrument. During the deferral period, DVAs are credited with additional notional units based on the return of the State Street Institutional U.S. Government Money Market Fund if the monthly dividend rate is at least equal to 0.001 per unit. These dividends vest and are paid at the same time and in the same form as the related DVA unit.

 

      2019 Non-Equity Incentive Plan Compensation  
Name    Immediate Cash      DVAs      Dividends
Credited on
Outstanding
DVAs
     Total  

Ronald P. O’Hanley

   $ 1,100,000      $ 1,650,000      $ 87,004      $ 2,837,004  

Eric W. Aboaf

     562,500        1,406,250        41,316        2,010,066  

Francisco Aristeguieta

     1,020,000        1,360,000               2,380,000  

Jeffrey N. Carp

     500,000        1,250,000        60,265        1,810,265  

Andrew J. Erickson

     582,500        1,456,250        31,372        2,070,122  

 

(5)

Because our deferred compensation plans do not provide above-market earnings, no earnings are included in this column. The amounts in this column represent the change in the actuarial present value of the accumulated benefits under our qualified and nonqualified defined benefit pension plans. The plans were frozen as of December 31, 2010 (December 31, 2017 for the Executive Supplemental Retirement Plan defined benefit provisions (ESRP-DB)), and therefore there were no accruals during 2019. Mr. Carp is the only NEO with accrued benefits under our defined benefit pension plans. For 2019, the change in value presented in the Summary Compensation Table above reflects a year-over-year update to applicable actuarial calculation assumptions from December 31, 2018 to December 31, 2019, including a decrease in the discount rate assumption for the State Street Retirement Plan (Retirement Plan), the Management Supplemental Retirement Plan (MSRP) and the ESRP-DB, as well as formula-driven changes due to a participant being older and closer to retirement. These updates resulted in increases in the actuarial present value of Mr. Carp’s benefits totaling $1,205,255, of which $289,094 is attributable to Mr. Carp’s age in proximity to the normal retirement age of 65 and $916,161 is attributable to changes in assumptions. The change in pension value presented in the Summary Compensation Table above represents actuarial calculations based upon assumptions on the relevant dates to the extent relevant factors are unknown. The actuarial present value of the accumulated pension benefits calculated on future dates may increase or decrease, based on assumptions applicable on those future dates and on formula-driven changes due to the executive’s age at the time.

 

  

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(6)

The following table describes the amounts set forth for 2019 in the “All Other Compensation” column:

 

Name    Executive
Security(A)
     International
Assignment(B)
     Company
Contributions
to Defined
Contribution
Plans(C)
     Charitable
Donations and
Matching
Contributions(D)
     Other
Benefits(E)(F)
     Total  

Ronald P. O’Hanley

   $ 46,112      $      $ 16,800      $ 55,000      $ 17,925      $ 135,837  

Eric W. Aboaf

                   27,800        45,000        10,125        82,925  

Francisco Aristeguieta

            755,319        32,551               347,494        1,135,364  

Jeffrey N. Carp

                   227,800        6,022        11,925        245,747  

Andrew J. Erickson

            1,250,700        50,048               11,925        1,312,673  

 

(A)

The Board approved an executive security package that provides a car and driver ($23,629) and residential security ($22,483) to Mr. O’Hanley. Car and driver values are calculated by allocating the total cost of the car and driver between non-business and business use by mileage traveled. The cost of security at Mr. O’Hanley’s residence reflects the amounts invoiced for alarm monitoring and maintenance.

(B)

In connection with his offer of employment, State Street agreed to provide Mr. Aristeguieta international assignment benefits including: a goods and services fixed allowance; relocation services; tax preparation and advisory services; and tax equalization payments. In connection with his international assignment, State Street provided Mr. Erickson benefits including: allowances for goods, services, and housing; tax preparation and advisory services; and tax equalization payments.

(C)

Company contributions to savings plans: (1) $16,800 to the Salary Savings Program (SSP) for Messrs. O’Hanley, Aboaf and Carp; (2) $11,000 to the Management Supplemental Savings Plan (MSSP) for Messrs. Aboaf and Carp; (3) $200,000 to the Executive Supplemental Retirement Plan-Defined Contribution component (ESRP-DC) for Mr. Carp; (4) $1,152 and $2,304 for Mr. Aristeguieta and Mr. Erickson, respectively, to the Mandatory Provident Fund (MPF); and (5) $31,399 and $47,744 for Mr. Aristeguieta and Mr. Erickson, respectively, to the Occupational Retirement Schemes Ordinance (ORSO).

(D)

Messrs. O’Hanley and Aboaf each directed contributions of $15,000 and $25,000, respectively, under our Executive Leadership program, which allows Executive Vice Presidents and above serving on non-profit boards to annually recommend a financial contribution from the State Street Foundation to the non-profit of up to $25,000. In addition, matching contributions were made in the name of Messrs. O’Hanley ($40,000), Aboaf ($20,000) and Carp ($6,022) under our matching gift program, which will match contributions made by employees to eligible charitable and educational organizations in accordance with specified annual limits.

(E)

Includes $6,000 for financial planning/ tax services for Messrs. O’Hanley and Aboaf; $7,800 for parking benefits for Messrs. O’Hanley, Carp and Erickson; $1,355 for personal liability coverage for Messrs. O’Hanley, Aboaf, Carp and Erickson and $678 for Mr. Aristeguieta; and $2,770 for executive health screening for each NEO.

(F)

Includes a car and driver ($47,558) and club memberships ($296,488, which includes a one-time fixed payment of $294,400) which are customary benefits for leaders in the region that we agreed to provide Mr. Aristeguieta in connection with his offer of employment.

The table above does not include any amounts for personal travel in connection with business travel by our NEOs because there was no aggregate incremental cost to the Company.

 

  

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2019 Grants of Plan-Based Awards

 

       

 

Estimated Possible
Payouts Under Non-Equity
Incentive Plan Awards(1)

 


 
 

 

   

 

Estimated Future
Payouts Under Equity
Incentive Plan Awards

 



 

 

   




All Other Stock
Awards:
Number of
Shares of
Stock or Units
(#)
 
 
 
 

 
   



Grant Date
Fair Value of
Stock and
Option Awards(2)
($)
 
 
 

 

Name

 

Award

 

Grant
Date

    Threshold
($)
    Target
($)
    Maximum
($)
    Threshold
(#)
    Target
(#)
    Maximum
(#)
 
(a)   (b)          (c)     (d)     (e)     (f)     (g)     (h)      (i)       (j)  

Ronald P. O’Hanley

  2019 Cash-Based Incentive     $     $ 3,300,000     $ 6,600,000                             $  
  Performance-Based RSU(3)     3/1/2019                         22,222       44,444       66,666             2,955,970  
  DSA(4)     3/1/2019                                           29,168       1,970,590  

Eric W. Aboaf

  2019 Cash-Based Incentive             2,030,000       4,060,000                                
  Performance-Based RSU(3)     3/1/2019                         11,656       23,311       34,967             1,550,415  
  DSA(4)     3/1/2019                                           15,299       1,033,600  

Francisco Aristeguieta

  2019 Cash-Based Incentive(5)       2,380,000       2,380,000       4,760,000                                
  Performance-Based RSU(6)     7/31/2019                         22,339       44,678       67,017             2,351,403  
  DSA(6)     7/31/2019                                           24,374       1,390,780  
  DSA(6)     7/31/2019                                           38,156       2,136,354  
  DSA(6)     7/31/2019                                           23,354       1,281,434  
  DSA(6)     7/31/2019                                           43,788       2,351,416  

Jeffrey N. Carp

  2019 Cash-Based Incentive             1,925,000       3,850,000                                
  Performance-Based RSU(3)     3/1/2019                         10,735       21,470       32,205             1,427,970  
  DSA(4)     3/1/2019                                           14,091       951,988  
  ESRP Share Award(7)     3/1/2019                                           2,748       200,054  

Andrew J. Erickson

  2019 Cash-Based Incentive             2,103,360       4,206,720                                
  Performance-Based RSU(3)     3/1/2019                         10,301       20,601       30,902             1,370,173  
  DSA(4)     3/1/2019                                           13,520       913,411  

 

(1)

For 2019, cash-based incentive amounts were awarded in the form of immediate cash and DVAs. The actual cash-based incentive awards earned are reported in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.

(2)

Fair value of the awards is computed in accordance with FASB ASC Topic 718, using the assumptions stated in note 18 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2019.

(3)

Performance-based RSUs granted as a part of 2018 compensation.

(4)

DSAs granted as a part of 2018 compensation.

(5)

The 2019 cash-based incentive threshold is the minimum amount payable to Mr. Aristeguieta under his offer letter.

(6)

Performance-based RSUs and DSAs granted on July 31, 2019 to Mr. Aristeguieta were intended to replace forfeited awards from his prior employer.

(7)

Deferred share awards granted as part of the ESRP-DC. These awards are described in the narrative accompanying the “2019 Nonqualified Deferred Compensation” table.

 

  

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Narrative Disclosure Accompanying Grants of Plan-Based Awards Table

The awards set forth in the “Estimated Possible Payouts Under Non-Equity Incentive Plan Awards” column of the 2019 Grants of Plan-Based Awards table above for Messrs. O’Hanley, Aboaf, Erickson and Carp were the cash-based portion of the target and maximum incentive awards that were granted as part of 2019 incentive compensation. The targets, minimum (0%) and maximum (200%) are described above under the heading, “Compensation Discussion and Analysis—New Compensation Program Features for the 2019 Compensation Year.” State Street agreed to provide Mr. Aristeguieta with cash-based incentive compensation, in the form of immediate cash and DVAs, to replace compensation he expected to receive at his prior employer. The actual cash-based incentive awards earned by each NEO as determined in February 2020 is included in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table. DVAs granted in February 2020, under the State Street Corporation Supplemental Cash Incentive Plan, for 2019 performance are deferred cash units that are notionally invested in the State Street Institutional U.S. Government Money Market Fund and receive dividends when the monthly dividend rate is at least equal to 0.001 per unit. These awards vest in quarterly installments over four years from the date of grant.

The awards granted in February 2019, set forth in the “Estimated Future Payouts Under Equity Incentive Plan Awards” column of the 2019 Grants of Plan-Based Awards table above, were performance-based RSUs. These awards were granted as a component of each NEO’s 2018 performance year incentive compensation. The awards granted in July 2019 to Mr. Aristeguieta were intended to replace forfeited awards from his prior employer. The percent at which these awards are earned will be determined based on the simple average of each calendar year’s return on equity and pre-tax margin, each weighted at 50%, for the three-year period from January 1, 2019 to December 31, 2021, subject to adjustment by the Human Resources Committee for pre-established factors. Based on the satisfaction of applicable performance criteria and on certification by the Human Resources Committee following the end of the performance period, the performance-based RSUs will vest in one installment. The 2019 performance-based RSUs with an ROE target of 13% and a Pre-tax Margin target of 29% are earned as shown in the table below:

 

    

 

Pre-tax Margin

 

         

Less than

24%

 

 

24%

 

25%

 

26%

 

27%

 

28%

 

29%

 

30%

 

31%

 

32%

 

33%

 

34% or

Above

 

LOGO

  

Less than
8%

 

  0%

 

  25%

 

  35%

 

  43%

 

  45%

 

  48%

 

  50%

 

  53%

 

  55%

 

  58%

 

  65%

 

  75%

 

   8%   25%   50%   60%   68%   70%   73%   75%   78%   80%   83%   90%   100%
   9%   35%   60%   70%   78%   80%   83%   85%   88%   90%   93%   100%   110%
   10%   43%   68%   78%   85%   88%   90%   93%   95%   98%   100%   108%   118%
   11%   45%   70%   80%   88%   90%   93%   95%   98%   100%   103%   110%   120%
   12%   48%   73%   83%   90%   93%   95%   98%   100%   103%   105%   113%   123%
   13%   50%   75%   85%   93%   95%   98%   100%   103%   105%   108%   115%   125%
   14%   53%   78%   88%   95%   98%   100%   103%   105%   108%   110%   118%   128%
   15%   55%   80%   90%   98%   100%   103%   105%   108%   110%   113%   120%   130%
   16%   58%   83%   93%   100%   103%   105%   108%   110%   113%   115%   123%   133%
   17%   65%   90%   100%   108%   110%   113%   115%   118%   120%   123%   130%   140%
  

18% and Above

 

  75%

 

  100%

 

  110%

 

  118%

 

  120%

 

  123%

 

  125%

 

  128%

 

  130%

 

  133%

 

  140%

 

  150%

 

The DSAs granted in February 2019 set forth in the “All Other Stock Awards” column of the 2019 Grants of Plan-Based Awards table above, were awarded as a component of each NEO’s 2018 performance year incentive compensation. These awards vest ratably in annual installments over four years from the date of grant. The DSAs granted to Mr. Aristeguieta in July 2019 set forth in the “All Other Stock Awards” column of the 2019 Grants of Plan-Based Awards table above were intended to replace forfeited awards from his prior employer. The vesting of these DSAs is described in footnotes 11, 12, 13 and 14 to the “Outstanding Equity Awards at Fiscal Year-End, December 31, 2019” table below.

 

  

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All performance-based RSUs and DSAs were granted under the 2017 Stock Incentive Plan and are subject to a “double-trigger” change-of-control vesting. Service-based restrictions lapse and vesting is accelerated if the executive incurs a qualified termination following the change of control. For more details refer to “Potential Payments upon Termination of Change of Control as of December 31, 2019—Change of Control” below.

All DVAs, DSAs and performance-based RSUs have a qualifying retirement provision. Under the retirement provision, service-based restrictions lapse after the participant attains the age of 55 and completes 5 years of service with State Street, with awards continuing to vest according to their original terms. Service-based restrictions lapse on all DVAs in the event a participant dies, becomes disabled and terminates employment or is involuntarily terminated without cause, and vesting is accelerated in the event of death or disability. Service-based restrictions lapse on all DSAs in the event a participant dies, becomes disabled and terminates employment or is involuntarily terminated without cause and vesting is accelerated in the event of death. Service-based restrictions lapse on all performance-based RSUs in the event a participant dies or becomes disabled and terminates employment or is involuntarily terminated without cause, but vesting continues according to the original terms.

None of the performance-based RSUs or DSAs receive dividends or dividend equivalents.

All incentive compensation awarded to our NEOs is subject to recourse mechanisms, including clawback, forfeiture and ex ante adjustments, as described above under the heading “Compensation Discussion and Analysis—Other Elements of Compensation—Adjustment and Recourse Mechanisms.”

The ESRP-DC granted to Mr. Carp in February 2019 under the 2017 Stock Incentive Plan, set forth in the “All Other Stock Awards” column of the 2019 Grants of Plan-Based Awards table above, provides Mr. Carp with additional retirement benefits in accordance with the terms of his employment arrangement. ESRP-DC equity grants receive dividend equivalents prior to vesting and payout. The ESRP-DC is subject to retirement eligibility and vesting as described under “2019 Nonqualified Deferred Compensation” below.

 

  

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Outstanding Equity Awards at Fiscal Year-End, December 31, 2019(1)

 

      Stock Awards(2)  
Name    Grant Date   Number of
Shares or Units
of Stock That
Have Not Vested
(#)
     Market Value of
Shares or Units
of Stock That
Have Not Vested
($)
     Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units, or
Other Rights That
Have Not Vested
(#)
     Equity Incentive
Plan Awards:
Market or Payout
Value of Unearned
Shares, Units, or
Other Rights  That
Have Not Vested
($)
 
(a)         (g)      (h)      (i)      (j)  

Ronald P. O’Hanley

   02/29/16(3)     9,383      $ 742,195         $  
   02/27/17(4)     14,150        1,119,265        
   02/27/17(5)     46,263        3,659,403        
   02/26/18(6)     14,781        1,169,177        
   02/26/18(7)           29,834        2,359,869  
   03/01/19(8)     29,168        2,307,189        
     03/01/19(9)                       44,444        3,515,520  

Eric W. Aboaf

   02/27/17(4)     4,425        350,018        
   02/27/17(5)     14,467        1,144,340        
   02/26/18(6)     9,101        719,889        
   02/26/18(7)           18,368        1,452,909  
   02/26/18(10)           19,751        1,562,304  
   03/01/19(8)     15,299        1,210,151        
     03/01/19(9)                       23,311        1,843,900  

Francisco Aristeguieta

   07/31/19(11)     24,374        1,927,983        
   07/31/19(12)     38,156        3,018,140        
   07/31/19(13)     23,354        1,847,301        
   07/31/19(14)     43,788        3,463,631        
     07/31/19(15)                       44,678        3,534,030  

Jeffrey N. Carp

   02/29/16(3)     6,196        490,104        
   02/27/17(4)     9,345        739,190        
   02/27/17(5)     30,551        2,416,584        
   02/26/18(6)     10,275        812,753        
   02/26/18(7)           20,738        1,640,376  
   03/01/19(8)     14,091        1,114,598        
     03/01/19(9)                       21,470        1,698,277  

Andrew J. Erickson

   02/29/16(16)     404        31,956        
   02/27/17(4)     3,818        302,004        
   02/27/17(5)     12,482        987,326        
   11/30/17(17)           44,763        3,540,753  
   02/26/18(6)     5,871        464,396        
   02/26/18(7)           11,851        937,414  
   03/01/19(8)     13,520        1,069,432        
     03/01/19(9)                       20,601        1,629,539  

 

  

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(1)

All outstanding equity awards are subject to recourse mechanisms, including clawback and forfeiture, as described above under the heading “Compensation Discussion and Analysis—Other Elements of Compensation.”

(2)

Stock award values in the table above are based on the closing share price of our common stock on the NYSE on December 31, 2019 ($79.10).

(3)

DSAs vest in four equal annual installments (25% per year) starting on February 15, 2017. The last installment vested on February 15, 2020.

(4)

DSAs vest in four equal annual installments (25% per year) starting on February 15, 2018. The balance of the award will vest in two equal installments, one of which vested on February 15, 2020; the remaining installment will vest on February 15, 2021.

(5)

Performance-based RSUs with a three-year performance measurement period (January 1, 2017-December 31, 2019). The awards were earned at 107.7% of target and vested in one installment on February 27, 2020.

(6)

DSAs vest in four equal annual installments (25% per year) starting on February 15, 2019. The balance of the award will vest in three equal installments, one of which vested on February 15, 2020; the remaining two installments will vest on February 15, 2021 and 2022.

(7)

Performance-based RSUs with a three-year performance measurement period (January 1, 2018-December 31, 2020) that will vest in one installment based on the satisfaction of applicable performance criteria and on certification by the Human Resources Committee following the end of the performance period.

(8)

DSAs vest in four equal annual installments (25% per year). The first installment vested on February 15, 2020; the remaining three installments will vest on February 15, 2021, 2022 and 2023.